Question

After extensive research, you believe the probability distribution for next year's return on FB Inc is:

Return	Probability
-1.5%	0.2
20.2%	0.3
-6.3%	0.3
23.4%	0.2

Compute the standard deviation of this return.  

Express your answer as a percentage to three decimal places (the percent sign is not essential). That is, if you compute a standard deviation of 0.12345, enter your answer as 12.345.

Answer 1

Ans 13.084

	Probability (P)	RETURN (Y)	(P * Y )	P * (Y -Average Return of Y)^2
	20%	-1.5	-0.30	20.20
	30%	20.2	6.06	40.72
	30%	-6.3	-1.89	66.16
	20%	23.4	4.68	44.10
		TOTAL	8.55	171.18
Expected Return =		(P * Y)
		8.55%
VARIANCE =		P * (Y -Average Return of Y)^2
		171.1785
Standard Deviation =		Square root of (P * (Y -Average Return of Y)^2)
		Square root of 171.1785
		13.084