Expected return=Respective return*Respective probability
=(-2*0.35)+(8*0.5)+(20*0.15)=6.3%
probability | Return | probability*(Return-Expected Return)^2 |
0.35 | -2 | 0.35*(-2-6.3)^2=24.1115 |
0.5 | 8 | 0.5*(8-6.3)^2=1.445 |
0.15 | 20 | 0.15*(20-6.3)^2=28.1535 |
Total=53.71% |
Standard deviation=[Total probability*(Return-Expected Return)^2/Total probability]^(1/2)
=(53.71)^(1/2)
=7.33%(Approx).
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