Question

You anticipate that an investment has a 30% chance of earning a 20% return, a 40%...

You anticipate that an investment has a 30% chance of earning a 20% return, a 40% chance of earning a 5% return, and a 30% chance of earning 12%. What is the standard deviation of this investment?  Answer in percent form to two decimal places.

Homework Answers

Answer #1

Ans 6.22

Probability (P) RETURN (Y) (P * Y ) P * (Y -Average Return of Y)^2
30% 20 6.00 21.17
40% 5 2.00 17.42
30% 12 3.60 0.05
TOTAL 11.60 38.64
Expected Return = (P * Y)
11.60%
VARIANCE = P * (Y -Average Return of Y)^2
38.6400
Standard Deviation = Square root of (P * (Y -Average Return of Y)^2)
Square root of 38.64
6.22
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