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Standard Deviaion & Probability

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Problem 16-8. Business and Financial Risk Here are the estimated ROE distributions for Firms A, B, and C:

PROBABILITY

________________________________________

0.1
0.2 0.4 0.2 0.1
________________________________________
Firm A:
0.0%
5.0%
10.0%
15.0%
20.0%

Firm B:
- 2.0 5.0 12.0 19.0 26.0
Firm C:
- 5.0 3.0 16.0 23.0 30.0
________________________________________
Calculate the expected value and standard deviation for Firm C's ROE. = 10.0%, = 5.5%; = 12.0%, = 7.7%. Round the answers to the nearest hundredth.
a. =

b. =?

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The solution computes standard deviation of ROE for 3 companies in a given scenario.

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