Solution-Dispersion of points around the mean of a

Dispersion of points around the mean of a distribution

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Reference no: EM131190019

You agree with calculation of the SD as shown below?

Variance measures the dispersion of points around the mean of a distribution. In this context, we are attempting to characterize the variability of possible future security returns around the expected return. In other words, we are trying to quantify risk and return. Variance measures the total risk of the possible returns.

State of Economy	Probability	Return (%)	Squared Deviation	Product (Dev*Prob)
+1% change in GDP	.25	-5	400	100
+2% change in GDP	.50	15	0	0
+3% change in GDP	.25	35	400	100
Total	1.00	E(R) = 15		s² = 200

Standard deviation = square root of variance = 14.14%

Reference no: EM131190019

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Dispersion of points around the mean of a distribution

Reference no: EM131190019

Reference no: EM131190019

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