Question

Unless otherwise instructed, use two (2) decimal places for both percentages and dollar amounts. This is enforced, like in Connect. If you need to enter units, use % for percentages, $ for dollar amounts, x for times and years for years. Question 22 (4 points) Consider the following probability distribution for next years's returns on Stock J. State Probability Return on J 1 0.2 0% 2 0.6 0.2 11% 24% 3 The standard deviation of returns for Security J is: Your Answer: Answer units

Answer 1

		P	R	A=P*R	D=R-11.4	E=D^2	F=P*E
	State	Probability	Return (%)	Return*Probability	Deviation from Mean	Deviation Squared	Probability* Deviation squared
	1	0.2	0	0	-11.4	129.96	25.992
	2	0.6	11	6.6	-0.4	0.16	0.096
	3	0.2	24	4.8	12.6	158.76	31.752
			Total	11.4		Total	57.84
	Mean Return	11.4%
	Variance of returns	57.84
	Standard Deviation=Square Root of Variance
	Standard Deviation of returns	7.61%	SQRT(57.84)
	Standard Deviation of returns of Security J is
		7.61	%