What happens if you compute the average deviation from the


1. What happens if you compute the average deviation from the mean, rather than the average squared deviation from the mean?

2. Asset A from Table 8.1 offers -1%, +2%, +4%, and +11% with equal probabilities. Now add 5% to each of these returns. This new asset offers +4%, +7%, +9%, and +16%. Compute the expected rate of return, the variance, and the standard deviation of this new asset. How does it compare to A?

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Financial Management: What happens if you compute the average deviation from the
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