Expected Return: Discrete Distribution The market and Stock J have the following

Question

Expected Return: Discrete Distribution

The market and Stock J have the following probability distributions:

Calculate the expected rate of return for the market. Round your answer to two decimal places.
%

Calculate the expected rate of return for Stock J. Round your answer to two decimal places.
%

Calculate the standard deviation for the market. Round your answer to two decimal places.
%

Calculate the standard deviation for Stock J. Round your answer to two decimal places.
%

Explanation / Answer

Expected return on market = 0.3*13%+0.4*8%+0.3*17% = 12.2%

Expected return on stock J = 0.3*20%+0.4*7%+0.3*12% = 12.4%

Standard deviation for market return = [0.3*(0.122-0.13)^2+0.4*(0.122-0.08)^2+0.3*(0.122-0.17)^2]^(1÷2) = 3.76%

Standard deviation for Stock J return = [0.3*(0.124-0.20)^2+0.4*(0.124-0.07)^2+0.3*(0.124-0.12)^2]^(1÷2) = 5.39%

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.