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5. Assume that an investment is forecasted to produce the following returns: a 20% probability of a 12% return; a 50% probabi

Can you explain?I am getting different numbers from provided answer

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Answer #1

Mean = 0.2*0.12 + 0.5*0.16 + 0.3*0.19

Mean = 0.024 + 0.08 + 0.057

Mean = 0.161 or 16.10%

Standard deviation = [0.2(0.12 - 0.161)2 + 0.5(0.16 - 0.161)2 + 0.3(0.19 - 0.161)2]1/2

Standard deviation = [0.000336 + 0.000001 + 0.000252]1/2

Standard deviation = [0.000589]1/2

Standard deviation = 0.0243 or 2.43%

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