A stock's return has the following distribution:
Demand for the Probability of This Rate of Return
Company's Products Demand Occuring if This Demand Occurs
Weak 0.1 (50%)
Below Average 0.2 (5%)
Average 0.4 16%
Above average 0.2 25%
Strong 0.1 60%
If the stock's expected return = 11.4%, calculate standard deviation and coefficient of variation.
In order to calculate the standard deviation, we need to first calculate the variance.
variance = Summation ( expected ...
The solution explains how to calculate the standard deviation of returns and the coefficient of variation.