A stock's return has the following distribution:
Demand for the
Company's Products Probability of This
Demand Occurring Rate of Return if This
Demand Occurs (%)
Weak 0.1 -45%
Below average 0.2 -6
Average 0.4 18
Above average 0.2 40
Strong 0.1 75
I need some help with answering these questions:
- Calculate the stock's expected return. Round your answer to two decimal places.
- Calculate the standard deviation. Round your answer to two decimal places.
This solution depicts the steps to calculate mean and standard deviation of returns in the given case, with all workings shown in excel file.