Apollo Ltd has the following estimated probability distribution of returns: RETURN Probability 4 % 0.2 12 % 0.5 14% 0.3 Calculate Apollo Ltd’s expected return, the variance and standard deviation of its expected return and the return’s coefficient of variation

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Apollo Ltd has the following estimated probability distribution of returns: RETURN Probability 4 % 0

Finance Jan 19, 2021

Apollo Ltd has the following estimated probability distribution of returns:

RETURN	Probability
4 %	0.2
12 %	0.5
14%	0.3

Calculate Apollo Ltd’s expected return, the variance and standard deviation of its expected return and the return’s coefficient of variation

Expert Solution

Expected return = Probability*Return

= .2*4% + .5*12% + .3*14% = .8% + 6% + 4.2% = 11%

Expected return = 11%

Variance = .2*(.04-.11)^2 + .5*(.12-.11)^2 + .3(.14-.11)^2 = .0013

Variance = .0013

Standard deviations = √.0013 = 3.61%

Standard deviations = 3.61%

Coefficient of variation = Standard deviations/Return

= 3.61%/11% = .33

Coefficient of variation = .33

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