9-12 Measuring risk Coin Toss Game-calculating variance and standard deviation (2) (3) Percent Rate of Return Deviation from Mean Squared deviation +40 +30 900 +10 0 +10 0 0 0 -30 900 Variance average of squared deviations= 1800/4=450 Standard deviation square of root variance /450=21.2 Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001©The McGraw-Hill Companies, Inc.,2001 9- 12 Irwin/McGraw-Hill Measuring Risk Coin Toss Game-calculating variance and standard deviation (1) (2) (3) Percent Rate of Return Deviation from Mean Squared Deviation + 40 + 30 900 + 10 0 0 + 10 0 0 - 20 - 30 900 Variance = average of squared deviations = 1800 / 4 = 450 Standard deviation = square of root variance = 450 = 21.2%