Question

What is the expected standard deviation of stock A’s returns based on the information presented in the table? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098. Note that figures in the table are presented in decimal format, not as percentages.

What is the expected standard deviation of stock A's returns based on the information presented in the table? Answer as a rate in decimal format so that 12.34% would be entered as.1234 and 0.98 % would be entered as.0098. Note that figures in the table are presented in decimal format, not as percentages. Outcome Good Probability of outcome Stock A return in outcome 0.3 0.8 Medium 0.4 0.1 Bad ? -0.3 Number

Answer 1

state Rate of return probability deviation = Return (-) 0.1900 deviation^2 deviation^2x probability Good 0.80 0.10 -0.30 Medium Bad Expected return (Return x probability) 0.24 0.04 -0.09 0.1900 0.30 0.40 0.30 0.6100 -0.0900 -0.4900 0.3721 0.0081 0.2401 0.1116 0.0032 0.0720 Expected return Variance 0.1869 Standard deviation = variance10.5 10.4323 [0.1869 0.5]