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Hayek Corporation has a 0.5 probability of a return of 0.08, a 0.2 probability of a...

Hayek Corporation has a 0.5 probability of a return of 0.08, a 0.2 probability of a rate of return of 0.06, and the remaining probability of a -0.10 rate of return. What is the variance in the expected rate of return of Hayek Corporation?

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Answer #1

The correct answer is 64.36

Note:

Probability Return Expected Return ( Probability * Expected Return)
0.50 0.0800 0.04000
0.20 0.0600 0.01200
0.30 -0.1000 -0.03000
Expected Return   0.022000
Expected Return   % 2.2000
Probability Probable Return Deviation ( Probable Return- Expected Return) Deviation Squared Product ( Deviation Squared* Probability)
0.50 8 5.80000 33.64000 16.82000
0.20 6 3.80000 14.44000 2.88800
0.30 -10 -12.20000 148.84000 44.65200
Variance 64.36000
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