Following is the calculation of standard deviation:
State | Probability | Return | Weighted return | probability x Squared deviations |
Boom | 0.4 | 16% | 0.4 x 16 = 6.4000% | 0.40 x (16-9.4)2= 0.1742% |
Normal | 0.4 | 10% | 0.4 x 10 = 4.0000% | 0.40 x (10-9.4)2= 0.0014% |
recession | 0.2 | -5% | 0.4 x -5= -1.0000% | 0.40 x (-5-9.4)2= 0.4147% |
Expected return | 6.4+4-1 = 9.4000% | |||
Variance | 0.1742+0.0014+0.4147 = 0.5904% | |||
Standard deviation | (0.5904)0.5 =7.6837% |
So the standard deviation = 7.684% rounded to 3 decimal places
You have made the following estimates of the economic nex year: Estimated returns in each scenario!...
You have made the following estimates of the economic next year: Estimated returns in each scenario: -boom economy: 16% - normal: 10% - recession: -5% The probability of each scenario: - boom economy: 0.40 - normal: 0.40 - recession: 0.20 What is the standard deviation of the returns? 7.684% 7.002% 7.165% 7.334%
Based on economic conditions, you compiled the following information with estimates of returns from Golden Fish Foodstuffs, Inc.'s stock and the probabilities associated with the economic condition for the next year: Market Condition Probability (p1) Golden Fish Foodstuffs, Inc. (rn) Boom 0.20 38% Normal 0.35 0.45 23% -30% Recession Using this information, calculate the standard deviation of returns from Golden Fish Foodstuffs, Inc.'s stock. 52.47% 5.44% 874.32% 29.57% 0 Anstand finanrofoacionafton the historial candidation to lato otimaton of the futuro
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Financial analysts have estimated the returns on shares of Drucker Corporation portfolio under various economic conditions as follows. The return for Drucker in the following three economic states of nature are forecasted to be:-15% in recession, +12% in moderate growth, and +36% in a boom. Estimates for the market as a whole in the same economic states are-12% in recession, +7% in moderate growth, and +21 % in boom. The analyst considers each state to be equally likely. Using these...