You were analyzing a stock and came up with the following probability distribution of the stock returns. What is the coefficient of variation on the company's stock?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
You were analyzing a stock and came up with the following probability distribution of the stock returns. What is the coefficient of variation on the company's stock?
Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
| State of the Economy |
Probability of State Occurring
|
Stock's Expected Return
|
| Boom |
20.00%
|
22.15%
|
| Normal |
46.00%
|
17.35%
|
| Recession |
34.00%
|
9.50%
|
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