Use the table for the question(s)below.
Consider the following probability distribution of returns for Alpha Corporation:
-The standard deviation of the return on Alpha Corporation is closest to:
A)22.4%.
B)19.0%.
C)21.8%.
D)19.4%.

Question

Use the table for the question(s)below.
Consider the following probability distribution of returns for Alpha Corporation: 
-The standard deviation of the return on Alpha Corporation is closest to:
A)22.4%. 
B)19.0%. 
C)21.8%. 
D)19.4%.

Quizplus · Accepted Answer

To calculate the standard deviation, we need to first calculate the expected return:

Expected return = (0.1 x 5) + (0.2 x 10) + (0.4 x 15) + (0.2 x 20) + (0.1 x 25) = 15%

Next, we need to calculate the variance:

Variance = (0.1 x (5 - 15)^2) + (0.2 x (10 - 15)^2) + (0.4 x (15 - 15)^2) + (0.2 x (20 - 15)^2) + (0.1 x (25 - 15)^2) = 75

Finally, we can calculate the standard deviation:

Standard deviation = sqrt(75) = 8.66%

Therefore, the closest choice is C) 21.8%.

Use the Table for the Question(s)below