Question

The figure in the popup window, shows the one-year return distribution for RCS stock. Calculate: a. The expected return b. The standard deviation of the return. Note: Make sure to round all intermediate calculations to at least five decimal places. a. The expected return. The expected return is %. (Round to two decimal places.) b. The standard deviation of the return. The standard deviation is %. (Round to two decimal places.) 0 Graph/Chart Probability % A-15% return B: -20% return C:0% retum D: 20% return E 15% return Print Done

Answer 1

Calculating the Expected Return and Standard deviation of RCS Stock:-

Probability (P)	Return (R)	Expected Return (P*R)	Deviation [(R)-(ER)]	[(R)-(ER)]2	[(R)-(ER)]2*P
0.10	-15	-1.5	-19	361	36.1
0.20	-20	-4	-24	576	115.2
0.15	0	0	-4	16	2.4
0.25	20	5	16	256	64
0.30	15	4.5	11	121	36.3
		ER = 4%			Variance = 254

i). Expected Return = 4%

ii). Variance = 254

Standard deviation =

Variance; = V254

= 15.94%

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