Your rate of return expectations for the common stock of Gray Cloud Company during the next year

Question:

Your rate of return expectations for the common stock of Gray Cloud Company during the next year are:

GRAY CLOUD CO.

Possible Rate of Return Probability

−0.10 ............0.25

0.00 ............0.15

0.10 ............0.35

0.25 ............0.25

a. Compute the expected return [E(Ri)] on this investment, the variance of this return (σ2), and its standard deviation (σ).

b. Under what conditions can the standard deviation be used to measure the relative risk of two investments?

c. Under what conditions must the coefficient of variation be used to measure the relative risk of two investments?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...