Question

An asset has four possible rates of return, all equally likely: 18.8%, 15.8%, 12.6%, and 13.9%. What is the standard deviation of this asset's rate of return?

Answer 1

Returns	probability	Expected return		deviation = Return (-) 15.28%	deviation^2	deviation ^ 2x probability
		(Return x probability)
18.8%	0.25	4.70%		3.525%	0.12%	0.00031
15.8%	0.25	3.95%		0.525%	0.00%	0.00001
12.6%	0.25	3.15%		-2.675%	0.07%	0.00018
13.9%	0.25	3.48%		-1.375%	0.02%	0.00005
Expected return		15.28%
					Variance	0.00054
				Standard deviation = variance^0.5	2.33%
					[0.00054^ 0.5 ]