Possible Return & Probability Standard Deviation HP 12c question

CFA Level I Quant
#1

Hello all, I am trying to complete the following question by using keystrokes on my HP 12C calculator. I am having some trouble arriving at the proper standard deviation and was wondering if I could get some help.

Given the following data, calculate the expected return and the standard deviation for this portfolio: Possible Return Probability of Return -15% .20 0 .10

12% .32

16% .38

(a) Expected return: 6.92% Standard deviation: 25.23%

(b) Expected return: 6.92% Standard deviation: 11.85%

© Expected return: 3.25% Standard deviation: 11.85%

My current process is: f Sigma (above the f key); .15- ; enter ; .2 ; Sigma+ ; 0 ; enter ; .1 ; Sigma+ ; .12 ; enter ; .32 ; Sigma+ ; .16 ; enter ; .38 ; Sigma+. When i then press g ; . (s) it gives me a standard deviatoion of 12.49% although the answer is 11.85%. Could someone please guide me to what I’m doing wrong?

Thanks,

#2

Am i crazy or doing something totally wrong? Any help is greatly appreciated :slight_smile:

#3

You can’t calculate the standard deviation of a probability distribution on the 12c nor the TI. Your answer was the standard deviation based on the n-1 in the denominator not based on the probabilities. You have to do it long hand unfortunately. You can however calculate the expected return. Enter the numbers in just as you did and hit [f] 6 - - - > the XbarW button. Hope that helps.

#4

okayy- gotchya and thanks for the expected return tip.

#5

I apologize, for the expeced return enter the numbers just as you did and hit [g] 6.