Expected value and standard deviation for firm's ROE
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Here are the estimated ROE distributions for Firms A, B, and C.
Probability
.1 .2 .4 .2 .1
Firm A: ROEa 0% 5% 10% 15% 20%
Firm B: ROEb 2% 5% 12% 19% 26%
Firm C: ROEc 5% 5% 15% 25% 35%
Calculate the expected value and standard deviation for Firm C's ROE.
ROEa=10%, standard deviation=5.5% ROEb=12% SDb=7.7%.
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Solution Summary
Given the probability distribution of a firms' ROE, expected value and standard deviation of ROE are calculated (see attachment).
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