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Expected Return with Discrete Distribution

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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
1.0

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.
%

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Solution Summary

This solution depicts the steps to calculate mean and standard deviation of returns in the given case, with all workings shown in excel file.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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