Question

QUESTION 5

1. After extensive research, you believe the probability distribution for next year's return on FB Inc is:

   Return	Probability
   -1.5%	0.2
   20.2%	0.3
   -6.3%	0.3
   23.3%	0.2

   
   Compute the standard deviation of this return.  
   
   Express your answer as a percentage to three decimal places (the percent sign is not essential). That is, if you compute a standard deviation of 0.12345, enter your answer as 12.345.

Answer 1

Ans 13.061

	Probability (P)	RETURN (Y)	(P * Y )	P * (Y -Average Return of Y)^2
	20%	-1.5	-0.30	20.1202
	30%	20.2	6.06	40.8567
	30%	-6.3	-1.89	65.9787
	20%	23.3	4.66	43.6306
		TOTAL	8.53	170.5861
Expected Return =		(P * Y)
		8.53%
VARIANCE =		P * (Y -Average Return of Y)^2
		170.5861
Standard Deviation =		Square root of (P * (Y -Average Return of Y)^2)
		Square root of 170.5861
		13.061