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In: Finance

Given the following information about a stock's return in the various states of the economy, calculate...

Given the following information about a stock's return in the various states of the economy, calculate the standard deviation of its return. USE EXCEL AND SHOW FORMULAS THAT WERE USED. Enter answer in percents

State of economy Probability Stock return
Recession 0.17 -0.26
Normal 0.34 0.08
Boom -- 0.18

Solutions

Expert Solution

Probability(boom) = 1 - Probability (recession) - Probability (normal)

= 0.49

E6 = E3+E4+E5

standard deviation of return of stocks = 0.1916

These are screenshots of one single excel sheet and formulas have been shown with the help of notations.

jeff jeffy answered 2 years ago
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