If an asset has a 35% probability of earning a 20% return and a 65% probability of earning a 5% return,what is its standard deviation?
A) 1.2%
B) 18.0%
C) 7.2%
D) 11.0%
E) 12.2%

Question

Quizplus · Accepted Answer

Step 1 - Compute the expected return. Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Expected return = (0.35 × 0.20) + (.65 × 0.05)Expected return = 0.1025 Step 2 - Use the expected return to calculate the standard deviation. Standard deviation = 11ea7fdb_fc11_c63c_a768_738da61dbac6_TB2902_11 Standard deviation = 11ea7fdb_fc11_c63d_a768_59447920fb7c_TB2902_11 Standard deviation = 11ea7fdb_fc11_c63e_a768_253081f9518a_TB2902_11 = 0.0715 or 7.2%

If an Asset Has a 35% Probability of Earning a 20