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    Coefficient of variation

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    Trying to figure out how a particular stock's return will vary depending on what will happen to the economy:

    State of Probability of Stock's Expected Return
    the Economy State Occurring if this State Occurs
    Recession 0.10 -60%
    Below Average 0.20 -10
    Average 0.40 15
    Above Average 0.20 40
    Boom 0.10 90

    What is the coefficient of variation on the company's stock?
    (Use the expected rate of return and the population standard deviation to calculate the coefficient of variation. Please show all calculations.

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    Solution Preview

    Coefficient of variation = standard deviation/expected return

    Expected return = Sum (Probability X associated return)
    Expected return = 0.1X-60% ...

    Solution Summary

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