Consider the following information: |
Rate of Return if State Occurs | |||
State of Economy | Probability of State of Economy | Stock A | Stock B |
Recession | 0.20 | 0.05 | -0.22 |
Normal | 0.70 | 0.08 | 0.13 |
Boom | 0.10 | 0.12 | 0.33 |
Required: |
(a) |
Calculate the expected return for Stock A. (Do not round your intermediate calculations.) |
(Click to select)7.80% |
(b) |
Calculate the expected return for Stock B. (Do not round your intermediate calculations.) |
(Click to select)8.00% |
(c) |
Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.) |
(d) |
Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.) |
Need the answers to C and D
Stock A | |||||
Scenario | Probability | Return% | =rate of return% * probability | Actual return -expected return(A)% | (A)^2* probability |
Recession | 0.2 | 5 | 1 | -2.8 | 0.0001568 |
Normal | 0.7 | 8 | 5.6 | 0.2 | 0.0000028 |
Boom | 0.1 | 12 | 1.2 | 4.2 | 0.0001764 |
Expected return %= | sum of weighted return = | 7.8 | Sum=Variance Stock A= | 0.00034 | |
C. Standard deviation of Stock A% | =(Variance)^(1/2) | 1.83 | |||
Stock B | |||||
Scenario | Probability | Return% | =rate of return% * probability | Actual return -expected return(A)% | (B)^2* probability |
Recession | 0.2 | -22 | -4.4 | -30 | 0.018 |
Normal | 0.7 | 13 | 9.1 | 5 | 0.00175 |
Boom | 0.1 | 33 | 3.3 | 25 | 0.00625 |
Expected return %= | sum of weighted return = | 8 | Sum=Variance Stock B= | 0.026 | |
D. Standard deviation of Stock B% | =(Variance)^(1/2) | 16.12 |
Consider the following information: Rate of Return if State Occurs State of Economy Probability of...
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Recession 0.20 0.03 -0.19 Normal 0.70 0.08 0.15 Boom 0.10 0.12 0.31 Required: Given that the expected return for Stock B is 9.800%, calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)
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