Question

Q12. The following outcomes (see below) and their probabilities are possible for an investment. What is the standard deviation of this investment? Return Probability 0.25 2% 10% 20% Tess 0.55 0.20 3.3% inatker nort A. 5.0% B. 7.0% 9.1% 6.0% RCDE

Answer 1

e.6.0%.

first let us know the mean:

=>(0.25*2) + (0.55*10) + (0.20*20)

=>10%.

now calculation of standard deviation:

probability	return	return - mean	(return - mean )^2	probability*(return - mean )^2
0.25	2%	(2-10)=>-8	64	(0.25*64)=>16
0.55	10%	(10-10)=>0	0	(0.55*0)=>0
0.20	20%	(20-10)=>10	100	(0.20*100)=>20
			variance	(16+20)=>36

standard deviation = $\sqrt{}$variance.

=>$\sqrt{}$36

=>6.0%.