## Expected Mean calculation

sujithmeno
Posts: 8
Joined: Sun Jun 24, 2012 8:00 pm

### Expected Mean calculation

Hi Can somebody explain the calculation here for expected mean?
Mamta Gandhi, has following return-probability profile for three stocks.

What is the expected rate of return and standard variation from his portfolio given equal weights to all?
a. 12.2%, 0.000046
b. 11.2%, 0.0068
c. 13.2%, .000046
The correct answer is 11.2%, 0.0068.

Mean return = return*probability = 12.2%
Variance =(0.2)*(0.12-0.122)2+(0.4)*(0.115-0.122)2+(0.4)*(0.13-0.122)2 = 0.000046
Standard deviation = variance *0.5 = 0.00678233

Tags:

sahiljindal1990
Posts: 5
Joined: Mon Nov 26, 2012 12:51 pm

### Re: Expected Mean calculation

The formula used here is for variance is as probabilities must have been given in the Question So we used Sigma*Prob*(Given Return-Expected Return)^2 for all the given Means and then Calculating the standard deviation from it by taking the Square root

pankaj
Finance Junkie
Posts: 61
Joined: Fri Aug 03, 2012 11:24 am

### Re: Expected Mean calculation

the question is incomplete, share the complete question.