Question
In: Finance
Stock A pays 30% in a boom, 5% in a normal economy and -20% in a...
Stock A pays 30% in a boom, 5% in a normal economy and -20% in a recession. If we are equally likely to see a boom, a normal economy and a recession next year, what is the standard deviation of the one-year return on stock A? Enter your result as a percentage point without the % sign, and round it to the second decimal point (i.e., if the answer is 10.3456%, enter it as 10.35).
Solutions
Expert Solution
Ans:- If all the scenarios are equally likely, then the probability of each state will become 0.33.
Standard deviation is calculated by taking the square root of the variance.
Therefore, the Standard deviation of one year return on stock A will be 20.31.
jeff jeffy answered 1 year agoRelated Solutions
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