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v Question Completion Status QUESTION 1 Economic Probability Security Return if Activity of Event Event (The Event) Occurring Occurs High growth Low growth Normal 0.1 40% 0.3 5% 0.5 12% growth Recession 0.1 -15% Total Based on the above scenario, the securitys expected return is: 1196 ) 17.75% 025% -58% 1096 Click Save and Submit to save and submit. Click Save All Answers to save all a Save A
v Question Completion Status: QUESTION Security Economic Probability Activity Return if of Event (The Event) Occurring Event Occurs High growth Low growth Normal 0.1 40% 0.3 5% 0.5 12% growth Recession 0.1 -15% Total Based on the above scenario, the securitys standard deviation of returns is: 14.14% 12.73% 0 19.71% o 22.76% 0 39.42% Click Save and Submit to save and submit. Clhick Save All Answers to save all answ Save All An
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Answer #1

1: Expected return= Sum of probability*Returns

= (0.1*40%)+ (0.3*5%)+ (0.5*12%)+ (0.1*-15%)

=10%

2:

Probability Returns Deviation from expected return Squared deviations
0.1 40% 30.0% 0.09
0.3 5% -5.0% 0.0025
0.5 12% 2.0% 0.0004
0.1 -15% -25.0% 0.0625

Variance = Sum of probability*Squared deviations

= 0.1*0.09+ 0.3*0.0025 + 0.5*0.0004+ 0.1*0.0625

=0.0162

SD= SQRT* Variance

= 12.73%

WORKINGS

Book1 Excel (Product Activation Failed) Sign in Home Insert Draw Page Layout Formulas t Rview Vie Tell me what you want to do Share a A Wrap Text General Sort & Find & Filter Select Paste 0 .00 Conditional Format as Cell Insert Delete Format . Formatting Table Styles Cliphoard Font Alignment Number Styles Cells Editing 82 x Probability Probabilit 0.1 0.3 0.5 0.1 Returns 0.4 0.05 0.12 0.15 Deviation from expected return Squared deviations -C3-$C$8 -C4-$C$8 -C5-$C$8 C6-$C$8 4 D42 -D5 2 D6 2 Expected return -(0.140%)+(0.3*5%)-(0.5* 12%)t(0.1°-15%)

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