B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.9 percent. Calculate

Question:

B. J. Gautney 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 Gautney invest in this security?

Probability Return

.15 .......23%

.30 ....... 2%

.40 ....... 4%

.15 ....... 6%

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...