expected rate of return and risk?

Question

probability-.15,.30,.40,.15 and return 6%,9%,10%and 15%
need expected return and its standard deviation. Can someone show me the steps involved in solving this problem

Answer 1

Expected return: (aka weighted average)

E(X) = .15(6%) + .30(9%) + .40(10%) + .15(15%)
= 9.85%

S.D. = sqrt(variance)

variance = E(X²) - E(X)²
E(X²) = .15( (.06)² ) + .30( (.09)² ) ....
=.010345

variance = 0.010345 - (.0985)² = .00064275

S.D. = sqrt(variance) = .0254 = 2.54%

Answer 2

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