TABLE 17-4
A stock portfolio has the following returns under the market conditions listed below.
$$\begin{array} { c c c }
\text { Market Condition } & \text { Probability } & \text { Return } \
\hline \text { Bull } & 0.4 & \$ 200 \
\text { Stable } & 0.3 & \$ 100 \
\text { Bear } & 0.3 & - \$ 100
\end{array}$$
-Referring to Table 17-4, what is the standard deviation?
A) 4,840
B) 4,890
C) 124.9
D) 69.6

Question

TABLE 17-4
A stock portfolio has the following returns under the market conditions listed below.
 $$\begin{array} { c c c } 
\text { Market Condition } & \text { Probability } & \text { Return } \
\hline \text { Bull } & 0.4 & \$ 200 \
\text { Stable } & 0.3 & \$ 100 \
\text { Bear } & 0.3 & - \$ 100
\end{array}$$
-Referring to Table 17-4, what is the standard deviation?
A) 4,840
B) 4,890
C) 124.9
D) 69.6

Quizplus · Accepted Answer

The standard deviation is the square root of the variance. The variance is the sum of the squared deviations from the mean, weighted by their probabilities. The mean is the expected value, which is the sum of the products of the returns and their probabilities. In this case, the mean is (0.4 * 200) + (0.3 * 100) + (0.3 * -100) = 60. The variance is [(0.4 * (200 - 60)^2) + (0.3 * (100 - 60)^2) + (0.3 * (-100 - 60)^2)] = 15600. The standard deviation is the square root of 15600, which is 124.9.

TABLE 17-4 a Stock Portfolio Has the Following Returns Under

TABLE 17-4
a Stock Portfolio Has the Following Returns Under