Ostroff, Fair and Company
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Expected rate of return and risk?


probability-.15,.30,.40,.15 and return 6%,9%,10%and 15%
need expected return and its standard deviation. Can someone show me the steps involved in solving this problem

Expected return: (aka weighted average)

E(X) = .15(6%) + .30(9%) + .40(10%) + .15(15%)
= 9.85%

S.D. = sqrt(variance)

variance = E(X虏) - E(X)虏
E(X虏) = .15( (.06)虏 ) + .30( (.09)虏 ) ....
=.010345

variance = 0.010345 - (.0985)虏 = .00064275

S.D. = sqrt(variance) = .0254 = 2.54%
I don't know the answer to your question but wanted to say Hi because we share the same name. Hope things are good with you!
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