Consider the following information Rate of Return if State Occurs State of Econo

Question

Consider the following information Rate of Return if State Occurs State of Economy Recession Normal Boom Probability of State of Economy 15 Stock A 02 10 Stock B -.30 18 .31 .30 Requirement 1: Calculate the expected return for the two stocks. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return E(RA) E(RB) 10.300 % 14.70 0 % Requirement 2: Calculate the standard deviation for the two stocks. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Standard deviationn 2.38 % 11.33 %

Explanation / Answer

SD of stock A = 4.12%

SD of B = 19.63%

p(x) return p*x p*(x - mean)^2 0.15 2.00% 0.003 0.001033 0.55 10.00% 0.055 0.000005 0.3 15.00% 0.045 0.000663

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