PLEASE SHOW STEP BY STEP DETAIL ESPECIALLY HOW TO FIND THE STANDARD DEVIATION AN

Question

PLEASE SHOW STEP BY STEP DETAIL ESPECIALLY HOW TO FIND THE STANDARD DEVIATION AND COEFFICIENT OF VARIATION ON THE CALCULATOR.

Stocks A and B have the following probability distributions of expected future returns:

Calculate the expected rate of return, rB, for Stock B (rA = 13.40%.) Do not round intermediate calculations. Round your answer to two decimal places.
%

Calculate the standard deviation of expected returns, A, for Stock A (B = 22.57%.) Do not round intermediate calculations. Round your answer to two decimal places.
%

Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.

Probability A B 0.1 (14%) (31%) 0.2 6 0 0.3 10 18 0.2 19 26 0.2 34 49

Explanation / Answer

1.expected rate of return, rB=Respective return*Respective probability

=(0.1*-31)+(0.2*0)+(0.3*18)+(0.2*26)+(0.2*49)=17.3%

2.

Standard deviation=[Total of Probability*(Return-Expected Return)^2/Total Probabiity]^(1/2)
=(180.64)^(1/2)

=13.44%(Approx)

Coefficient of variation for B=Standard deviation/Expected Return

=(22.57/17.3)

which is equal to

=1.30(Approx).

Probability Return Probability*(Return-Expected Return)^2 0.1 -14 0.1*(-14-13.4)^2=75.076 0.2 6 0.2*(6-13.4)^2=10.952 0.3 10 0.3*(10-13.4)^2=3.468 0.2 19 0.2*(19-13.4)^2=6.272 0.2 34 0.2*(34-13.4)^2=84.872 Total=180.64%

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