Homework Answers
Answer 1-a.
Mean Return = 0.20 * 0.20 + 0.15 * 0.15 + 0.50 * 0.05 + 0.15 *
(-0.05)
Mean Return = 0.08 or 8.00%
Answer 1-b.
Variance = 0.20 * (0.20 - 0.08)^2 + 0.15 * (0.15 - 0.08)^2 +
0.50 * (0.05 - 0.08)^2 + 0.15 * (-0.05 - 0.08)^2
Variance = 0.0066
Standard Deviation = (0.0066)^(1/2)
Standard Deviation = 0.0812 or 8.12%
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