Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of earning a 10% rate of return, and a 10% chance of losing 3%. What is the standard deviation of this investment?
A) 5.14%
B) 7.59%
C) 9.29%
D) 8.43%

Question

Quizplus · Accepted Answer

E(r_p) = (.4)(15%) + (.5)(10%) + (.10)(−3%) = 10.7% σ(r_p) = .4(.15 − .107)² + .5(.10 − .107)² + .10(−.03 − .107)² σ(r_p) = 5.14%

Your Investment Has a 40% Chance of Earning a 15