Question

The table below shows the one-year return distribution for RCS stocks.

Possible Return Ri	Probability pi
-40%	0.10
-20%	0.20
0%	0.15
20%	0.25
40%	0.30

(a) The expected return is: %. (Round to two decimal places.)

(b) The standard deviation is: %. (Round to two decimal places.)

Answer 1

	Probability (P)	RETURN (Y)	(P * Y )	P * (Y -Average Return of Y)^2
	10%	-40	-4.00	240.10
	20%	-20	-4.00	168.20
	15%	0	0.00	12.15
	25%	20	5.00	30.25
	30%	40	12.00	288.30
		TOTAL	9.00	739.00
Expected Return =		(P * Y)
		9.00%
VARIANCE =		P * (Y -Average Return of Y)^2
		739.0000
Standard Deviation =		Square root of (P * (Y -Average Return of Y)^2)
		Square root of 739
		27.18