The rate of return on the common stock of Flowers by Flo is expected to be...

The rate of return on the common stock of Flowers by Flo is expected to be 14 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy. The probabilities of these economic states are 10 percent for a boom, 50 percent for a normal economy, and 40 percent for a recession. What is the standard deviation of returns for this investment? Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.)

Solutions

Expert Solution

Solution :

The standard deviation of returns for this investment = 3.8419 %

= 3.84 % ( When rounded off to two decimal places )

The solution is 3.84

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 1 year ago

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