View Point Industries has forecast a rate of return of 20.00% if the economy booms (25.00% probability); a rate of return of 15.00% if the economy is in a growth phase (45.00% probability); a rate of return of 2.50% if the economy is in decline (20.00% probability); and a rate of return of -15.00% if the economy is in a depression (10.00% probability). What is View Point's standard deviation of returns? Do not round intermediate computations. Round your final answer to two decimal points.
A) 17.31%
B) 9.25%
C) 15.00%
D) 10.29%

Question

Quizplus · Accepted Answer

Using the formula for standard deviation of returns:
σ = √[(0.25*(20-17.75)^2) + (0.45*(15-17.75)^2) + (0.20*(2.5-17.75)^2) + (0.1*(-15-17.75)^2)]
σ = 10.29%
Therefore, the best choice is D.

View Point Industries Has Forecast a Rate of Return of 20.00