What would the standard deviation be for this company?

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  • What would the standard deviation be for this company?

  • What would the standard deviation be for this company?
  • Estimating Returns
  • Imagine the following scenario:
    A company is faced with a 20 percent chance of a poor economy, a 40 percent chance of an average economy, and a 40 percent chance of an above-average economy. The company would expect only a 10 percent return in a poor economy, an 18 percent return in an average economy, and a 30 percent return in an above-average economy.
    Use the hypothetical situation above to answer these questions to demonstrate the use of probability analysis in estimating returns:
  • What would the expected return be for this company?
  • What would the standard deviation be for this company?
  • How does the standard deviation help you better understand what to expect in terms of a return?
  • Use at least two resources to support your ideas.
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