Question

An analyst has constructed the following probability distribution for firm X's predicted return for the upcoming...

An analyst has constructed the following probability distribution for firm X's predicted return for the upcoming year.

Return

Probability

-5

0.24

-8

0.30

10

0.15

12

0.11

-2

0.2

Find the standard deviation of this distribution. (Keep the answer with 2 decimal places)

Homework Answers

Answer #1

Solution :

x P(x) x * P(x) x2 * P(x)
-5 0.24 -1.2 6
-8 0.3 -2.4 19.2
10 0.15 1.5 15
12 0.11 1.32 15.84
-2 0.2 -0.4 0.8
Sum 1 -1.18 56.84

Mean = = X * P(X) = -1.18

Standard deviation =

=X 2 * P(X) - 2

=  56.84 - (-1.18)2

= 7.45

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