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Homework answers / question archive / Suppose Treasuries yield 5% and the returns for an equity (risky) investment are: Probability Return 0
Suppose Treasuries yield 5% and the returns for an equity (risky) investment are:
|
Probability |
Return |
|
0.05 |
+50% |
|
0.25 |
+30% |
|
0.40 |
+10% |
|
0.25 |
–10% |
|
0.05 |
–30% |
Calculate Standard Deviation?
Calculate Expected Return?
Standard Deviation =(0.5*(50%-10%)^2+0.25*(30%-10%)^2+0.40*(10%-10%)^2+0.25*(-10%-10%)^2+0.05*(-30%-10%)^2)^0.5
=32.86%
Expected Return =0.05*50%+0.25*30%+0.40*10%+0.25*-10%+0.05*-30% =10%
