Calculate the standard deviations for Roll and Ross by filling in the following

Question

Calculate the standard deviations for Roll and Ross by filling in the following table (verify your answer using returns expressed in percentages as well as decimals): (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your Standard deviation answers to 2 decimal places and other answers to 4 decimal places. Omit the "%" sign in your response.)

Security Returns If State Occurs   State of
  Economy Probability of
  State of Economy         Roll        Ross   Bust .20 –12 % 13 %   Boom .80 30 6

Explanation / Answer

Expected return for ross =0.2*-12% +0.8*30%

=21.6%

Expected Return for Ross =0.2*13% +0.8*6% =7.4%

   Return Deviation     Squared Return      Product    Probability of   from Expected Return Deviation   State of Economy Excpectd return   Roll     Bust 0.2 21.60% -33.600%           Boom 0.8 21.60% 8.400%           2 = 24.49%       Ross     Bust 0.2 7.40% 5.600%           Boom 0.8 7.40% -1.400%           2 = 4.08%    

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