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    Expected Return and Standard Deviation of a Security

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    Given the following probability distribution, what is the expected return and the standard deviation of returns for security J?

    state 1, probability 0.2, expected return 10%
    state 1, probability 0.6, expected return 15%
    state 3, probability 0.2, expected return 20%

    a. 15%; 6.50%
    b. 12%; 5.18%
    c. 15%; 3.16%
    d. 15%; 10.00%
    e. 20%; 5.00%

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    Solution Summary

    This solution looks at given probability distributions for a security and calculates the expected return and standard deviation for that security.