1 answer

The Garcia Corporation's stock has a 60% probability of experiencing an 15% return, a 30% probability...

Question:

The Garcia Corporation's stock has a 60% probability of experiencing an 15% return, a 30% probability of a 18% return, and a 10% probability of a 14% return. What is the standard deviation of the stock's return?

2.34 %

3.10%

1.77%

1.47%

2.64%


Answers

Expected Return = 0.15 * 0.6 + 0.18 * 0.30 + 0.14 * 0.10

= 15.8%

Given Return (X) Expected Return (X1) (X-X1)2 probability (X-X1)2 * Probability
0.15 0.158 0.000064 0.60 0.0000384
0.18 0.158 0.000484 0.30 0.0001452
0.14 0.158 0.000324 0.10 0.0000324
Total 0.000216

SD = 0.000216

= 0.0146969 OR 1.47%

Option D is correct.

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