(6–4)

Expected Return:

Discrete Distribution A stock’s return has the following distribution:

Calculate the stock’s expected return, standard deviation, and coefficient of variation.

Subsidiary Percentage of Business Beta Electric utility 60% 0.70 Cable company 25 0.90 Real estate 10 1.30 International/special projects 5 1.50 Demand for the Company’s Products Probability of This Demand Occurring Rate of Return If This Demand Occurs (%)

Weak 0.1 −50%

Below average 0.2 (5)

Average 0.4 16 Above average 0.2 25 Strong 0.1 60 1.0 258 Part 3: Stocks and Options