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Universal Corporation is planning to invest in a security that has several possible rates of return. Given the probability distribution of returns, what is the
Universal Corporation is planning to invest in a security that has several possible rates of return. Given the probability distribution of returns, | ||||
what is the expected rate of return on the investment? Also, compute the standard deviation of the returns. | ||||
What do the resulting numbers represent? | ||||
PROBABILITY | RETURNS | |||
0.15 | -10% | |||
0.25 | 5% | |||
0.35 | 10% | |||
0.25 | 25% |
a. The expected rate of return on the investment is | ||||||
(Round to two decimal places.) | ||||||
b. The standard deviation of the returns is | ||||||
(Round to two decimal places.) | ||||||
c. What do the resulting numbers represent? | ||||||
(Select the best choice below.) | ||||||
A. Universal could expect a return of 9.50 percent with a 67 percent possibility that this return would vary up or down by 11.06 percent. | ||||||
B. Universal could expect a return of 11.06 percent with a 67 percent possibility that this return would vary up or down by 9.50 percent | ||||||
C. Universal could expect a return of 11.06 percent with a 25 percent possibility that this return would vary up or down by 9.50 percent. | ||||||
D. Universal could expect a return of 9.50 percent with a 25 percent possibility that this return would vary up or down by 11.06 percent |
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