requirement 1 Calculate the return for the two stocks. requirement 2 Calculate t

Question

requirement 1
Calculate the return for the two stocks.

requirement 2
Calculate the standard deviation for the two stocks.

Award: 10.00 points Problem 11-7 Calculating Returns and Standard Deviation Consider the following information Rate of Return if State Occurs State of Economy Recession Nomal Boom Probability of State of Economy 23 Stock A 025 105 270 Stock B 28 51 19 Requirement 1: Calculate the expected retum for the two stocks. (Do not round inberms answers as a percentage rounded to 2 decimal places 9-3216).) Expected retum E(RA) E(RB) Requirement 2: Calculate the standard deviation for the two stocks. (Do not round your answers as a percentage rounded to 2 decimal places (e.g., 32 Standard deviation OB Hints Hint #1

Explanation / Answer

Requirement: 1

Requirement: 2

Stock A

Stock B

STOCK A STOCK B State of Economy Probability Rate of Return Expected Value: Return * Probability Rate of Return Expected Value: Return * Probability Recession 0.23 0.025 0.00575 -0.38 -0.002185 Normal 0.58 0.105 0.0609 0.28 0.017052 Boom 0.19 0.27 0.0513 0.51 0.026163 Total 0.11795 Total 0.04103 Expected Return: Stock A= 0.11795= 11.80% Expected Return: Stock B= 0.0.04103=4.10%

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