Question

question 7

An investment earned the following returns for the years 2013 through 2016:15%, 5%, 30%, and 10%. What is the variance of returns for this investment?

Select one:

a. 0.1541

b. 0.0892

c. 0.1747

d. 0.0323

e. 0.0117

question 8

Given the following information, what is the standard deviation of stock A if it has an expected return of 33% in a boom economy, an expected return of 18% in a good economy, and an expected return of 2% in a recession? The probabilities of boom, normal, recession are 0.2, 0.6, and 0.2, respectively.

Select one:

a. 0.0527

b. 0.0891

c. 0.0981

d. 0.0703

e. 0.0128

Answer 1

7)

8) Average return = 33% x 0.2 + 18% x 0.6 + 2% x 0.2 = 17.8%

Standard deviation in computed as follows -

or, Std Dev = 9.806% or 0.0981 (Option c)