Question

In: Finance

Consider the following information:    Rate of Return if State Occurs   State of Economy Probability of...

Consider the following information:

  

Rate of Return if State Occurs
  State of Economy Probability of State of Economy Stock A Stock B
  Recession .20 .06 –.20
  Normal .70 .08 .15
  Boom .10 .13 .34

  

Calculate the expected return for Stock A.

  

Calculate the expected return for Stock B.

  

Calculate the standard deviation for Stock A.

  

Calculate the standard deviation for Stock B

Solutions

Expert Solution

Calculate the expected return for Stock A.

8.10%

Calculate the expected return for Stock B.

9.90%

Calculate the standard deviation for Stock A.

1.81%

Calculate the standard deviation for Stock B

15.97%

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