QUESTION 5
Return | Probability |
-1.5% | 0.2 |
20.2% | 0.3 |
-6.3% | 0.3 |
12.3% | 0.2 |
first let us know the expected return
=> (-1.5%)*0.20 + (20.2%*0.30) + (-6.3%*0.30) + (12.3%*0.2)
=>-0.30+6.06-1.89+2.46
=>6.33%.
now,
calculation of standard deviation:
return | probability | (return - expected return)^2 | Probability*(return - expected return)^2 |
-1.5% | 0.20 | (-1.5-6.33)^2=>61.3089 | 0.20*61.3089=>12.26178 |
20.20% | 0.30 | (20.2-6.33)^2=>192.3769 | 0.30*192.3769=>57.71307 |
-6.3% | 0.30 | (-6.3-6.33)^2=>159.5169 | 0.30*159.5169=>47.85507 |
12.3% | 0.20 | (12.3-6.33)^2=>35.6409 | 0.20*35.6409=>7.12818 |
variance | 124.9581 |
standard deviation = 124.9581
=>11.178.
QUESTION 5 After extensive research, you believe the probability distribution for next year's return on FB Inc is: Return Probability -1.5% 0.2 20.2% 0.3 -6.3% 0.3 12.3% 0.2 Comput...
After extensive research, you believe the probability distribution for next year's return on FB Inc is: Return Probability -1.5% 0.2 20.2% 0.3 -6.3% 0.3 25.8% 0.2 Compute the standard deviation of this return. Express your answer as a percentage to three decimal places (the percent sign is not essential). That is, if you compute a standard deviation of 0.12345, enter your answer as 12.345.
QUESTION 5 After extensive research, you believe the probability distribution for next year's return on FB Inc is: Return Probability -1.5% 0.2 20.2% 0.3 -6.3% 0.3 23.3% 0.2 Compute the standard deviation of this return. Express your answer as a percentage to three decimal places (the percent sign is not essential). That is, if you compute a standard deviation of 0.12345, enter your answer as 12.345.
Question 4 (1 point) A stock DEF has the following payoffs probabilities: Probability 0.2 0.5 0.3 Payoff $100 $130 $200 What is the Expected Payoff to the stock? Your Answer: Answer Question 5 (1 point) During a 3-months period, the price index increases from 120.8 to 121.5. During the same period, a stock increases in price for $100 to $110.5. What is the real rate of return for the stock for the 3 month period? Express your answer as a...
Please explain how you found the answer, thank you. 5. Assume the stock return for the next month is a random variable that follows a Normal distribution with the mean 1.5% and the standard deviation 5%, which is the true probability. The interest rate is 0.2% for the next month. Suppose you are the owner of a big investment bank, and one of your VIP clients wants to buy a customized derivative from you. The payoff of such derivative is...