Assume the probability of a pessimistic, most likely and optimistic state of nature is .25, .45 and .30, and the returns associated with those states of nature are 10%, 12%, and 16% for asset X.Based on this information, the expected return and standard deviation of return are: Same as 73 with "none of the above" answer
A)12.0% and 4.0%
B)12.7% and 5.0%
C)12.7% and 4.0%
D)12.0% and 5.0%
E)none of the above

Question

Quizplus · Accepted Answer

The expected return is calculated as (0.25 * 10%) + (0.45 * 12%) + (0.30 * 16%) = 12.7%. The standard deviation calculation involves more steps and results in a value that does not match any of the given options.

Assume the Probability of a Pessimistic, Most Likely and Optimistic