Question

The Garcia Corporation's stock has a 50% probability of experiencing an 23% return, a 35% probability of a 19% return, and a 15% probability of a 16% return. What is the standard deviation of the stock's return?

2.34 %

3.10%

1.77%

1.47%

2.64%

Answer 1

Returns probability | deviation^2 deviation^2x probability deviation = Return (-1) 20.55% 23% 19% 16% 50% 35% 15% Expected return (Return x probability) 0.12 0.07 0.02 20.55% 0.02 -0.02 -0.05 0.00 0.00 0.00 0.00030 0.00008 0.00031 Expected return Variance 0.0007 Standard deviation = variance10.5 2.64% [0.0007^0.5] 2.64%