SCENARIO 19-4
A stock portfolio has the following returns under the market conditions listed below. $$\begin{array} { r c r }
\underline{\text { Market Condition }} & \underline{ \text { Probability} } & \underline{ \text { Return }} \
\text { Bull } & 0.4 & \$ 200 \
\text { Stable } & 0.3 & \$ 100 \
\text { Bear } & 0.3 & - \$ 100
\end{array}$$
-Referring to Scenario 19-4, what is the standard deviation?
A) 4,890
B) 4,840
C) 124.9
D) 69.6

Question

SCENARIO 19-4
A stock portfolio has the following returns under the market conditions listed below. $$\begin{array} { r c r } 
 \underline{\text { Market Condition }} & \underline{ \text { Probability} } & \underline{ \text { Return }} \
\text { Bull } & 0.4 & \$ 200 \
\text { Stable } & 0.3 & \$ 100 \
\text { Bear } & 0.3 & - \$ 100
\end{array}$$
-Referring to Scenario 19-4, what is the standard deviation?
A) 4,890
B) 4,840
C) 124.9
D) 69.6

Quizplus · Accepted Answer

The standard deviation is the square root of the variance. The variance is calculated as the sum of the squared deviations from the mean, divided by the number of observations. In this case, the mean is $100. The squared deviations from the mean are $10,000, $0, and $10,000. The sum of the squared deviations is $20,000. The variance is $20,000 / 3 = $6,666.67. The standard deviation is the square root of $6,666.67, which is $124.9.

SCENARIO 19-4 a Stock Portfolio Has the Following Returns Under

SCENARIO 19-4
a Stock Portfolio Has the Following Returns Under