Question

6. Butterfly Ballot Inc. common stock has the following projected rates of return (outcomes): −10%, 20%, and 60%. The probabilities of their outcomes are 20%, 50%, and 30% respectively. What are the expected return and standard deviation of Butterfly Ballot Inc. common stock?

Question 6 options:

A) 15% and 6.46%, respectively

B) 26% and 24.98%, respectively

C) 19% and 24.27%, respectively

D) 31.67% and 16.87%, respectively

Answer 1

Ans B) 26% and 24.98%, respectively

	Probability (P)	RETURN (Y)	(P * Y )	P * (Y -Average Return of Y)^2
	20%	-10	-2.00	259
	50%	20	10.00	18
	30%	60	18.00	347
		TOTAL	26.00	624
Expected Return =		(P * Y)
		26.00%
VARIANCE =		P * (Y -Average Return of Y)^2
		624.00
Standard Deviation =		Square root of (P * (Y -Average Return of Y)^2)
		Square root of 624
		24.98