Question

Use the following scenario analysis for stocks X and Y to answer the questions.

	Bear	Normal	Bull
	Market	Market	Market
Probability	35.00%	55.00%	10.00%
Stock X	-28.00%	9.00%	30.00%
Stock Y	-16.00%	15.00%	50.00%

What is the expected rate of return for stock X? and What is the standard deviation of return for stock Y? Enter your answer rounded to two decimal places.

Answer 1

Stock X:

Return (r) -28.00% 9.00% 30.00% Expected Probability return [(P(r)] [rxP(r)= u] 0.35 -9.80% 0.55 4.95% 0.101 3.00% Expected return (u) -1.85%

Stock Y:

E33 : X C =B33-$D$37 E A B F G Probability 32 Return (r) [(P(r)] 33 -16.00% 0.35 15.00% 0.55 50.00% 0.10 36 37 Expected return (u) 38 V fx D Expected return [rxP(r)=u] -5.60% 8.25% 5.00% ru -23.65% 7.35% 42.35% (r-u)^2 0.0559 0.0054 0.1794 P(r)x(r-u)^2 1.96% 0.30% 1.79% 7.65% 4.05% Variance (012) Standard deviation (0) 39 20.12%

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