roenfeld Corp believes the following probability distribution exist for its stoc

Question

roenfeld Corp believes the following probability distribution exist for its stock. what is the expected return, standard deviation a
nd coefficient of variation on the company stock?

Homework 4-Chapter 8 1. Roenfeld Corp believes the following probability distribution exists for its stock. What is the expected return, standard deviation and coefficient of variation on the compan stock? State of the Economy Boom Normal Recession Probability of State Occurring 0.40 0.50 0.10 Stock's Expected Return 30% 12% -10% 2 Cooley Company's stock has a beta of 1.20, the risk-free rate is 3%, and the market risk the market? What is the firm's required rate of

Explanation / Answer

Expected return is calculated as follows:

Expected return = 0.4*30% +0.5*12%+0.10*(-10%) = 17%

Expected return = 17%

The coeffcient of variance and standard deviation is as calculated in the table:

State Probability Return (Return - Expected) (Return - Expected)^2 (Return - Expected)^2* Prob Boom 0.4 0.3 0.13 0.0169 0.00676 Normal 0.5 0.12 -0.05 0.0025 0.00125 Recession 0.1 -0.1 -0.27 0.0729 0.00729 Expected Return 0.17 Coefficient of Variance 0.0153 Standard deviation 12.37%

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.