Risk & Return

Question 1
Solution
Demand for the Probability of Rate of Return Stock's Expected Deviation Squared Probability of Probability *
Company's this Demand of this demand Expected Return from the Deviation from this Demand Squared
products Occurring occurs Return (Mean) Mean the Mean Occurring Deviation
Weak 0.1 -50% -5% 11% -61% 37% 0.1 0.03721
below Average 0.2 -5% -1% 11% -16% 3% 0.2 0.00512
Average 0.4 16% 6% 11% 5% 0% 0.4 0.001
Above Average 0.2 25% 5% 11% 14% 2% 0.2 0.00392
Strong 0.1 60% 6% 11% 49% 24% 0.1 0.02401
11% Variance σ^2 0.07126
SD - σ 0.26694
Expected Return Mean 11%
CV = (Standard Deviation/Mean) × 2.4267272727