You agree with calculation of the SD as shown below?
Variance measures the dispersion of points around the mean of a distribution. In this context, we are attempting to characterize the variability of possible future security returns around the expected return. In other words, we are trying to quantify risk and return. Variance measures the total risk of the possible returns.
|
State of Economy
|
Probability
|
Return (%)
|
Squared Deviation
|
Product (Dev*Prob)
|
|
+1% change in GDP
|
.25
|
-5
|
400
|
100
|
|
+2% change in GDP
|
.50
|
15
|
0
|
0
|
|
+3% change in GDP
|
.25
|
35
|
400
|
100
|
|
Total
|
1.00
|
E(R) = 15
|
|
s2 = 200
|
Standard deviation = square root of variance = 14.14%