Question

Consider the following information: Rate of Return if State Occurs State of Economy Recession Normal Boom Probability of State of Economy 0.20 0.60 0.20 Stock A 0.04 0.07 0.11 Stock B -0.21 0.15 0.32 Required: (a) Calculate the expected return for Stock A. (Do not round your intermediate calculations.) ( (Click to select) (b) Calculate the expected return for Stock B. (Do not round your intermediate calculations.) (Click to select) A (c) Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.) (Click to select) A (d) Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.) (Click to select),

Answer 1

1. Expected return stock A-7,2%

probablity	return	prob*return
0.2	0.04	0.008
0.6	0.07	0.042
0.2	0.11	0.022
total		0.072

2. Same as above stock B Expected return=11.2%