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What is the standard deviation of the return of the following project? Event Probability of event occurring Return on project (%) Expected return (%) Booming economy 0
What is the standard deviation of the return of the following project?
| Event | Probability of event occurring |
Return on project (%) |
Expected return (%) |
| Booming economy | 0.2 | 35 | 25 |
| Growing economy | 0.6 | 10 | 10 |
| Declining economy | 0.2 | 5 | 5 |
Select one:
a. 25.10%
b. 15.34%
c. 10.68%
d. 5.22%
Expert Solution
expected return=0.2*35%+0.6*10%+0.2*5%=14.00%
the standard deviation of the return
=(0.2*(35%-14%)^2+0.6*(10%-14%)^2+0.2*(5%-14%)^2)^0.5
=10.68%
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