Homework Answers
SD:
It spcifies the risk of Stock
SD = SQRT [ [ Sum ( X-AvgX)^2 ) ] / n ]
SD = SQRT [ SUm [ Prob * (X-AVgX)^2 ] ]
| Prob | Ret | Prob* Ret | ||
| 0.2000 | 20.00% | 4.00% | ||
| 0.8000 | -30.00% | -24.00% | ||
| Expected Return | -20.00% | |||
| Prob | Ret (X) | (X-AvgX) | (X-AvgX)^2 | Prob * (X-Avg X)^2 |
| 0.2000 | 0.2000 | 0.4000 | 0.160000 | 0.03200 |
| 0.8000 | -0.3000 | -0.1000 | 0.010000 | 0.00800 |
| Sum[ Prob * ( X-AvgX)^2 ) ] | 0.04000 | |||
| SD = SQRT [ [ Sum[ Prob * ( X-AvgX)^2 ) ] ] ] | 0.20000 | |||
| i.e., SD = 20% |
Option C has to be selected
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