Calculate the standard deviation of the estimated returns

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Tucker Corporation's manager believes that the economic environment during the next year can be good, normal, or bad, and he thinks that a stock(I)'s returns will have the following probability distribution shown below.

Econ. Envi. Prob. Return

Good 30% 32.0%

Normal 40% 10.0%

Bad 30% -16.0%

problem 1. Calculate the expected return.

problem 2. Calculate the standard deviation of the estimated returns.

problem 3. Calculate the coefficient of variation.

problem 4. Assume that there is an alternative stock, (stock II) gives an expected return of 13%, with a standard deviation of .20, which stock would you prefer to invest in?

Reference no: EM132792695

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