Homework Answers
| Expected Return | |||||
| Possible Returns Xi |
probability P(Xi) |
XiP(Xi) | |||
| 5 | 0.4 | 2 | |||
| 7 | 0.3 | 2.1 | |||
| 12 | 0.2 | 2.4 | |||
| 20 | 0.1 | 2 | |||
| Total X = expected return = | 8.5 | ||||
| * In simple terminology multiply the possible returns with probablity and add the total of the resultant figures, we get the expected return of the portfolio |
| Standard Deviation | ||||
|
Possible Returns Xi |
probability P(Xi) |
Deviation: Possible return(Xi) - expected return |
Deviation Squared |
Product (multipy probality and deviation squared) |
| 5 | 0.4 | -3.5 | 12.25 | 4.9 |
| 7 | 0.3 | -1.5 | 2.25 | 0.675 |
| 12 | 0.2 | 3.5 | 12.25 | 2.45 |
| 20 | 0.1 | 11.5 | 132.25 | 13.225 |
| Variance | 21.25 | |||
| Standard deviation | root of 21.25 | |||
|
4.60977 |
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