An investor is analyzing two stocks: stock A and stock B. He estimates the follo

Question

An investor is analyzing two stocks: stock A and stock B. He estimates the following probabilities of return depending on the state of economy:
State of economy
Probability
Return of Stock A
Return of Stock B
Expansion
0.25
15%
5%
Normal
0.6
8%
10%
Recession
0.15
-5%
12%
Question 9: Calculate the standard deviation of stock A and stock B, respectively.
A. Stock A: 5.13%; Stock B: 2.44%
B. Stock A: 5.13%; Stock B: 2.70%
C. Stock A: 6.13%; Stock B: 2.44%
D. Stock A: 6.13%; Stock B: 2.70%
E. Stock A: 7.13%; Stock B: 2.44%
F. Not enough information to calculate

Explanation / Answer

Answer is C.

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