Final answer:
To calculate the expected return for Solar Power Ltd., multiply each possible return by its corresponding probability and sum the results. to calculate the variance, find the squared difference between each return and the expected return, multiply it by its probability, and sum the results. The standard deviation can be found by taking the square root of the variance. the standard error is calculated by dividing the standard deviation by the square root of the number of observations. The coefficient of variation is calculated by dividing the standard deviation by the expected return and multiplying by 100.
Step-by-step explanation:
To calculate the expected return for Solar Power Ltd., we need to multiply each possible return by its corresponding probability and sum the results. Based on the information provided, we have the following possible returns and probabilities:
Return 1: 10%, Probability: 0.3
Return 2: 12%, Probability: 0.5
Return 3: 15%, Probability: 0.2
Expected Return = (0.1 * 0.3) + (0.12 * 0.5) + (0.15 * 0.2) = 0.03 + 0.06 + 0.03 = 0.12 or 12%
To calculate the variance, we need to find the squared difference between each return and the expected return, multiply it by its probability, and sum the results:
Variance = (0.1 - 0.12)^2 * 0.3 + (0.12 - 0.12)^2 * 0.5 + (0.15 - 0.12)^2 * 0.2 = 0.0006 + 0 + 0.00018 = 0.00078 or 0.078%
Standard Deviation = √Variance = √0.00078 = 0.028 or 2.8%
Standard Error = Standard Deviation / √n, where n is the number of observations. In this case, n=3. Therefore, Standard Error = 0.028 / √3 = 0.016 or 1.6%
Coefficient of Variation = (Standard Deviation / Expected Return) * 100 = (0.028 / 0.12) * 100 = 23.33%