For reading 19 on Asset allocation, I’m a bit confused on the rounding conventions on the grey box example on page 193-194.
The formula is E(R)m) - .0005*Ra*variance m
so for the first one I have 10% - .005*2 *.2^2 = 9.96%
They have: 10% - .01 * (.2^2) = 6% OR 10% - .01*4 = 6%
But they are interpreting the standard deviation of 20%^ 2 to equal 4 rather than .04. Can someone advise on the rounding convention? The formula is easy but the squaring of %’s throws me off. Thanks.
The formula is E(R)m) - .0005*Ra*variance m
so for the first one I have 10% - .005*2 *.2^2 = 9.96%
They have: 10% - .01 * (.2^2) = 6% OR 10% - .01*4 = 6%
But they are interpreting the standard deviation of 20%^ 2 to equal 4 rather than .04. Can someone advise on the rounding convention? The formula is easy but the squaring of %’s throws me off. Thanks.