An analyst has constructed the following probability distribution for firm X's predicted return for the upcoming year. The expected value and the variance of this distribution are:
A)Option A
B)Option B
C)Option C
D)Option D

Question

An analyst has constructed the following probability distribution for firm X's predicted return for the upcoming year.  The expected value and the variance of this distribution are: 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

Option B provides the expected value of the distribution, which is the sum of the product of each possible return and its corresponding probability. It also provides the variance of the distribution, which is the sum of the squared deviations of each possible return from the expected value, weighted by their corresponding probabilities. Options A and D provide only the expected value and not the variance, while Option C provides only the variance and not the expected value.

An Analyst Has Constructed the Following Probability Distribution for Firm