You are considering investing in a project with the following possible outcomes: Calculate the expected rate of return and standard deviation of returns for this investment,respectively.
A)8.72%,12.99%
B)7.35%,12.99%
C)3.50%,1.69%
D)2.18%,1.69%

Question

You are considering investing in a project with the following possible outcomes:  Calculate the expected rate of return and standard deviation of returns for this investment,respectively.
A)8.72%,12.99% 
B)7.35%,12.99% 
C)3.50%,1.69% 
D)2.18%,1.69%

Quizplus · Accepted Answer

By calculating the weighted average of the possible outcomes, we get an expected rate of return of 8.72%. 
To calculate the standard deviation, we calculate the variance by finding the weighted average of the squared deviations from the expected return, which gives us a variance of 0.0169. Taking the square root of the variance gives us a standard deviation of 12.99%. Therefore, option A is the best choice.

You Are Considering Investing in a Project with the Following