Example:Variance and Standard Deviation Consider the previous example.What are the variance and standard deviation for each stock? State Probability C T Boom 0.3 0.15 0.25 Normal 0.5 0.10 0.20 Recession ?? 0.02 0.01 Stock C 62=.3(.15-.099)2+.5(.1-.099)2+.2(.02-.099)2=.002029 0=.045 Stock T 2=.3(.25-.177)2+.5(.2-.177)2+.2(.01-.177)2=.007441 6=.0863 66 Example: Variance and Standard Deviation n Consider the previous example. What are the variance and standard deviation for each stock? n Stock C 2 = .3(.15-.099)2 + .5(.1-.099)2 + .2(.02-.099)2 = .002029  = .045 n Stock T 2 = .3(.25-.177)2 + .5(.2-.177)2 + .2(.01-.177)2 = .007441  = .0863 State Probability C T Boom 0.3 0.15 0.25 Normal 0.5 0.10 0.20 Recession ??? 0.02 0.01