Question

Given the following distribution, what is the standard deviation: Probability Rate of Return

0.3 15%

0.4 10%

0.3 5%

Question 2 options: 10% 5.03% 2.94% 3.87%

Answer 1

Ans 3.87%

	Probability (P)	RETURN (Y)	(P * Y )	P * (Y -Average Return of Y)^2
	30%	15	4.50	7.50
	40%	10	4.00	0.00
	30%	5	1.50	7.50
		TOTAL	10.00	15.00
Expected Return =		(P * Y)
		10.00%
VARIANCE =		P * (Y -Average Return of Y)^2
		15.0000
Standard Deviation =		Square root of (P * (Y -Average Return of Y)^2)
		Square root of 15
		3.87