Your Investment Has a 40% Chance of Earning a 15

question 80

Multiple Choice

Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of earning a 10% rate of return, and a 10% chance of losing 3%. What is the standard deviation of this investment?

• A) 5.14%
• B) 7.59%
• C) 9.29%
• D) 8.43%

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Definitions:

Inventory

The total amount of goods and materials held by a company for the purpose of sale, use in production, or other operational purposes.

Financial Leverage

The use of borrowed funds with the intent to increase the potential return on investment.

Capital Structure

The blend of types of financing a company uses, including debt, equity, and other securities, to fund its operations and growth.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing ownership interest in the company.