The standard deviation of the returns on a portfolio that is invested 37 percent in stock q and 63 percent in stock is 0.71.
A standard deviation (or σ) is the degree of ways dispersed the records are with regard to the suggested. The low standard deviation way information is clustered around the suggested, and the high fashionable deviation suggests statistics are extra spread out.
In statistics, the standard deviation is a measure of the amount of version or dispersion of a fixed of values. A low popular deviation suggests that the values have a tendency to be near the suggest of the set, at the same time as a highly fashionable deviation shows that the values are spread out over a much broader variety.
Don't forget the statistics set: 2, 1, three, 2, 4. The suggest and the sum of squares of deviations of the observations from the mean will be 2.4 and five.2, respectively. thus, the same old deviation might be √(five.2/five) = 1.01.
Stock R
State of Economy Probability (P) Return(%) Probability*Return Deviation form expected return (D2) PD2^2
Boom 0.15 15 2.25 1.7 0.43
Normal 0.85 13 11.05 -0.3 0.08
Expected Return = \sumProbability*Return
= 2.25+11.05
= 13.30%
Variance = \sumPD2^2
= .43+.08
= 0.51
Standard Deviation = \sqrt{}Variance
= \sqrt{}.51
= .71
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