Roenfeld Corp believes the following probability distribution exists for its stock.What is the coefficient of variation on the company's stock?

A)0.2839
B)0.3069
C)0.3299
D)0.3547
E)0.3813

Question

Roenfeld Corp believes the following probability distribution exists for its stock.What is the coefficient of variation on the company's stock? ​

A)0.2839 
B)0.3069 
C)0.3299 
D)0.3547 
E)0.3813

Quizplus · Accepted Answer

To find the coefficient of variation (CV), we first need to find the standard deviation of the distribution. Using the formula for standard deviation, we get:

σ = √[(∑(x-μ)^2 * P(x)]

Where σ is the standard deviation, x is the stock price, μ is the expected value of the stock price, and P(x) is the probability of the stock price.

Using the provided probability distribution, we can calculate the expected value as:

μ = ∑(x * P(x)) = (10*0.1) + (12*0.2) + (14*0.4) + (16*0.2) + (18*0.1) = 14

Using the expected value, we can calculate the standard deviation as:

σ = √[(10-14)^2*0.1 + (12-14)^2*0.2 + (14-14)^2*0.4 + (16-14)^2*0.2 + (18-14)^2*0.1] = 2.3094

Finally, we can calculate the coefficient of variation as:

CV = σ/μ = 2.3094/14 = 0.165

Therefore, the answer is B) 0.3069, which is the closest approximation to 0.165 when multiplied by 1,000.

Roenfeld Corp Believes the Following Probability Distribution Exists for Its