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Bird Corporation has a 0.1 probability of a return of -0.23, a 0.1 probability of a...

Bird Corporation has a 0.1 probability of a return of -0.23, a 0.1 probability of a rate of return of 0.07, and the remaining probability of a -0.10 rate of return. What is the variance in the expected rate of return of Bird Corporation?

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Expert Solution

Probability (P) Return P*Return Deviation form expected return (D) PD^2
                     0.10                       (0.23)                    (0.023)                              (0.1340)                  0.0018
                     0.10                         0.07                       0.007                                 0.1660                  0.0028
                     0.80                       (0.10)                    (0.080)                              (0.0040)                  0.0000

Expected Return = P*Return

= -.023+.007-.080

= -0.096

= -9.6%

Variance = PD^2

= .0018+.0028+0

= 0.0046

jeff jeffy answered 11 months ago
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