P13-7 Calculating Returns and Standard Deviations [LO1] Based on the following i

Question

P13-7 Calculating Returns and Standard Deviations [LO1]

Based on the following information, the expected return and standard deviation for Stock A are percent and percent, respectively. The expected return and standard deviation for Stock B are percent and percent, respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

Based on the following information, the expected return and standard deviation for Stock A are percent and percent, respectively. The expected return and standard deviation for Stock B are percent and percent, respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

expected return for Stock A = .15*0.05 + .65*.08 + .2*.13 = 8.55%

standard deviation for Stock A = sqrt(0.15*(0.05- 8.55%)^2+ .65*(.08- 8.55%)^2 + .2*(.13 - 8.55%)^2) = 2.46%

expected return for Stock B=.15*(-0.17) + .65*.12+ .2*.29 = 11.05%

standard deviation for Stock B = sqrt(.15*(-0.17-11.05%)^2 + .65*(.12-11.05%)^2+ .2*(.29-11.05%)^2) =13.53%

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