EXPECTED RETURN A stocks returns have the following distribution: Demand for the Companys Products Weak Below average Average Above average Strong Probability of this Demand Occurring 0.1 0.1 0.3 0.3 0.2 1.0 Rate of Return if this Demand Occurs (30%) (14) 11 20 45 Assume the risk-free rate is 2%. Calculate the stocks expected return, standard deviation, coefficient of variation, and Sharpe ratio.

1Expected return = 0.1*(-30%) + 0.1*(-14%) + 0.3*(11%) + 0.3*(20%) + 0.2*(45%) = 13.90%

Standard deviation = Sqrt( 0.1*(-30%-13.9%)2 + 0.1*(-14%-13.9%)2 + 0.3*(11%-13.9%)2 + 0.3*(20%-13.9%)2 + 0.2*(45%-13.9%)2 ) = Sqrt (4.78%) = 21.86%

Coefficient of variation = Standard deviation / Expected return = 21.86% / 13.90 % = 1.57

Sharpe ratio ?