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Question: The expected possible outcomes for Roxy Stock are below. What is the expected return? What is the... The expected possible outcomes for Roxy Stock

Question: The expected possible outcomes for Roxy Stock are below. What is the expected return? What is the...

The expected possible outcomes for Roxy Stock are below. What is the expected return? What is the expected variance? What is the expected standard deviation?

Outcome

Probability

Return

Recession

40%

-25%

Expansion

25%

20%

Boom

35%

45%

Here is what I am getting - I think there is a disconnect with my totals. Can you please point me in the right direction?

Outcome Return (Re) Probability(P) Expected Return (Er) Re-Er (Re-Er)2 P x (Re-Er)2 = this will give you Variance number
Recession -0.25 0.4 (-25x.4)= -0.1 (-.25-(-.1)) = .35 (.35)2 =.1225 (0.4) x (.1225) = 0.049
Expansion 0.2 0.25 (0.2x.25)= .05 (.2-.05) = .15 (.15)2 = .0225 (.25) x (.0225) = 0.005625
Boom 0.45 0.35 (.45x.35)= .1575 (.45-.1575) = .2925 (.2925)2 = .0856 (.35) x (.0856) = 0.02996
Total 10.75% Variance = .084585 or 8.46%
Standard Deviation = Square Root of Variance = 29.08%

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