03 - Question and Problem Answers Chapter 3- Measuring...

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σ 2 E [ X E [ X ]] 2 σ 2 E [ X 2 2 X E [ X ] E [ X ] 2 ] σ 2 E [ X 2 ] 2 E [ X ] E [ X ] E [ X ] 2 σ 2 E [ X 2 ] 2 E [ X ] 2 E [ X ] 2 σ 2 E [ X 2 ] E [ X ] 2 Q . E . D . Question and Problem Answers page 1 Chapter 3- Measuring Portfolio Risk ± 3 - 1: Just expand the standard formula and regroup. This question should bring back fond memories of high school algebra. ± 3 - 2: To visualize the risk associated with these stocks we use the properties of the normal distribution: that an observation lies within one standard deviation of the mean 68% of the time, within two standard deviations of the mean 95% of the time, and within three standard deviations of the mean 99.7% of the time. Monthly Returns 2/28/05 to 2/28/06
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03 - Question and Problem Answers Chapter 3- Measuring...

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