The market and Stock J have the following probability distributions: Probability rM rJ 0.3 12% 20%...

The market and Stock J have the following probability distributions:

Probability	r_M	r_J
0.3	12%	20%
0.4	8	7
0.3	17	13

Calculate the expected rate of return for the market. Round your answer to two decimal places.

Calculate the expected rate of return for Stock J. Round your answer to two decimal places.

Calculate the standard deviation for the market. Do not round intermediate calculations. Round your answer to two decimal places.

Calculate the standard deviation for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.

Solutions

Expert Solution

Solution :

The expected rate of return for the market = 11.90 %
The expected rate of return for Stock J = 12.70 %

The standard deviation for the market = 3.7269 %

= 3.73 % ( when rounded off to two decimal places )

The standard deviation for Stock J = = 5.3861 %

= 5.39 % ( when rounded off to two decimal places )

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

jeff jeffy answered 7 months ago

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