Question
Asked Nov 24, 2019
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I am struggling with this problem and getting it set up for excel.

You are looking at an investment with the following outcomes (and probabilities):
2.>
11% chance of a 38% return
24% chance of a 15% return
12% chance ofa 12%return
17% chance ofa 7% return
18% chance ofa 2% return
10% chance ofa-4% return'
8% chance of a -16% return
What is the expected return and standard deviation of this investment?|
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You are looking at an investment with the following outcomes (and probabilities): 2.> 11% chance of a 38% return 24% chance of a 15% return 12% chance ofa 12%return 17% chance ofa 7% return 18% chance ofa 2% return 10% chance ofa-4% return' 8% chance of a -16% return What is the expected return and standard deviation of this investment?|

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Expert Answer

Step 1

Calculation of Expected Return and Standard Deviation:

The expected return is 9.09% and standard deviation is 13.36%.

Excel Spreadsheet:

...
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A В C 1 Probability Returns Probability*Returns Variance of Returns 4.1800% 0.00919367 2 11% 38% 24% 3 15% 3.6000% 0.00083827 12% 1.4400% 4 12% 0.00010162 0.00007426 5 17% 7% 1.1900% 18% 6 2% 0.3600% 0.00090483 7 10% -4% -0.4000% 0.00171348 0.00503606 8 8% -16% -1.2800% 9 Expected Return 9.09% 0.01786219 10 Variance 11 Standard Deviation 13.36%

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