Homework SourseWhat is the expected rate of return and risk Potts Enterpris
What is the expected rate of return and risk? Potts Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.9 percent. Calculate the following investment’s expected return and its standard deviation. Should Potts invest in this security?
Probability | Return
0.15 -3%
0.3 2%
0.4 4%
0.15. 6%
What is the expected rate of return and risk? Potts Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.9 percent. Calculate the following investment’s expected return and its standard deviation. Should Potts invest in this security?
Probability | Return
0.15 -3%
0.3 2%
0.4 4%
0.15. 6%
Probability | Return
0.15 -3%
0.3 2%
0.4 4%
0.15. 6%
Solution
robality
Return
Potts should not invest in this security because it is giving less expected return than T-bills.
Expected rate of return is the return on investing any security by taking care of all possibilities.
Risk is measure by the standard deviation it is mainly the adverse situation arises while investing in securities.
| robality | Return |
| 0.15 | -3% |
| 0.3 | 2% |
| 0.4 | 4% |
| 0.15 | 6% |
| Expected return | 2.65% |
| standard deviation | 2.71% |
