Answer:
5.139%
Explanation:
P(Xi) = Probability of event Xi
E(X) = Expected value of X
The expected value of this investment is the weighted average of the possible returns:
[tex]E(X) = 0.40*0.15+0.50*0.10+0.10*(-0.03)\\E(X) = 0.107[/tex]
The standard deviation of this investment is:
[tex]S=\sqrt{\sum P(X_i)(X_i-E(X))^2}\\S=\sqrt{0.40*(0.15-0.107)^2+0.50*(0.10-0.107)^2+0.10*(-0.03-0.107)^2} \\S=0.05139=5.139\%[/tex]
This investment has a standard deviation of 5.139%.
