Based on your analysis, you think that next year’s return for General Foods will range from 1 to 15 percent as described earlier. The expected value of the probability distribution for General Foods returns is calculated in the first three columns of Table  7-1. We call this expected value the expected rate of return, or simply expected return.

Table  7-1 

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TABLE 7-1 Calculating the Standard Deviation Using Expected Data (2) Probability (3) (1) × (2) (1) Possible Return (%) 1 7 8 0 5 0.2 0.2 0.3 0.1 0.2 1.0 0.2 1.4 2.4 1.0 3.0 8.0 = E(R) (4) R- E(R) -7.0 -1.0 0.0 2.0 7.0 (5) (R - E(R))² 49.0 1.0 0.0 4.0 49.0 (6) (R.- E(R))²pr 9.8 0.2 0.0 0.4 9.8 20.2