Question $2(20$ marks$)$

You have analysed the performance of a company in the manufacturing industry for the last five

years. The company is called Bags For All. Based on this research, you have predicted the

following returns for investors:

Share Probability Return

Bags For All $20\%8\%$

$15\%20\%$

$35\%12\%$

$30\%10\%$

REQUIREMENTS

$($a$)$ Calculate the expected return for this share. $(4$ marks$)$

$($b$)$ Calculate the variance of the expected return. $(5$ marks$)$

$($c$)$ Calculate the standard deviation of the expected return. $(5$ marks$)$

$($d$)$ Explain how the investor will use the standard deviation calculated in $($c$)$ in her investment

decision. $(6$ marks$)$