Following are three economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow...

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Question

Following are three economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow growth Rec

Answer 1

Answer #1

Expected Return = 0.24 * 0.36 + 0.36 * 0.11 + 0.40 * (-0.28)
Expected Return = 0.0140 or 1.40%

Variance = 0.24 * (0.36 - 0.014)^2 + 0.36 * (0.11 - 0.014)^2 + 0.40 * (-0.28 - 0.014)^2
Variance = 0.066624

Standard Deviation = (0.066624)^(1/2)
Standard Deviation = 0.2581 or 25.81%

Answer 2

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