What is the standard deviation of an investment that has the following expected scenario? If there is an 18% probability of a recession,2.0% return;if there is a 65% probability of a moderate economy,9.5% return;if there is a 17% probability of a strong economy,14.2% return.
A)3.68%
B)1.23%
C)8.47%
D)6.66%

Question

Quizplus · Accepted Answer

To calculate the standard deviation, first find the expected return: (0.18 * 2.0) + (0.65 * 9.5) + (0.17 * 14.2) = 8.77%. Then, calculate the variance: 0.18*(2.0-8.77)^2 + 0.65*(9.5-8.77)^2 + 0.17*(14.2-8.77)^2 = 13.54. The standard deviation is the square root of the variance, which is approximately 3.68%.

What Is the Standard Deviation of an Investment That Has