Consider the following probability distribution for stocks A and B: $\begin{array}{cccc}
\text { State } & \text { Probability } & \text { Return on Stock A}&\text { Return on Stock E } \
1 & 0.10 & 10 \% & 8 \% \
2 & 0.20 & 138 & 78 \
3 & 0.20 & 128 & 68 \
4 & 0.30 & 148 & 98 \
5 & 0.20 & 158 & 8 \%
\end{array}$
The standard deviations of stocks A and B are _____ and _____, respectively.
A) 1.5%; 1.9%
B) 2.5%; 1.1%
C) 3.2%; 2.0%
D) 1.5%; 1.1%

Question

Consider the following probability distribution for stocks A and B: $\begin{array}{cccc}
\text { State } & \text { Probability } & \text { Return on Stock A}&\text { Return on Stock E } \ 
1 & 0.10 & 10 \% & 8 \% \
2 & 0.20 & 138 & 78 \
3 & 0.20 & 128 & 68 \
4 & 0.30 & 148 & 98 \
5 & 0.20 & 158 & 8 \%
\end{array}$
 The standard deviations of stocks A and B are _____ and _____, respectively.
A) 1.5%; 1.9%
B) 2.5%; 1.1%
C) 3.2%; 2.0%
D) 1.5%; 1.1%

Quizplus · Accepted Answer

The standard deviation of a probability distribution is a measure of how spread out the data is. It is calculated by taking the square root of the variance, which is the average of the squared differences between each data point and the mean.In this case, the mean return on stock A is 13.2% and the variance is 2.25%. The standard deviation is therefore sqrt(2.25%) = 1.5%.The mean return on stock B is 8.4% and the variance is 1.21%. The standard deviation is therefore sqrt(1.21%) = 1.1%.

Consider the Following Probability Distribution for Stocks a and B