Question

What's the standard deviation of a portfolio with these individual rates of return and probability weights?...

What's the standard deviation of a portfolio with these individual rates of return and probability weights? In English, what does standard deviation mean/tell us?

  • -15% with 20% probability
  • +10% with 30% probability
  • +12% with 40% probability
  • +20% with 10% probability
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Answer #1

We can find the standard deviation of stock using the following formula :-

standard deviation of stock =

This is demonstrated using the excel as follows :-

standard deviation of stock = = 11.24

probability weights may be taken as 2:3:4:1

In English, standard deviation means the deviation of the actual result from the standard.

…………Hope you are satisfied with the solution provided, kindly support me by rating the answer………....

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