Question
( Expected return and risk ) Universal Corporation is planning to invest in a security that has several possible rates of return. Given the probability
(Expected return andrisk) Universal Corporation is planning to invest in a security that has several possible rates of return. Given the probability distribution of returns in the popup window, what is the expected rate of return on the investment? Also compute the standard deviation of the returns. What do the resulting numbersrepresent?
PROBABILITY | RETURN | |||
0.05 | 10% | |||
0.15 | 0% | |||
0.25 | 5% | |||
0.55 | 15% | |||
(Click on the icon located on the top-right corner of the data table above in order to copy its contents into aspreadsheet.) |
a. The expected rate of return on the investment is
9.009.00%.
(Round to two decimal places.)
b. The standard deviation of the returns is
nothing%.
(Round to two decimal places.)
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