Chapter 12 Hamework x pnMducation.com.hrntpx 20.00 points Consider the following

Question

Chapter 12 Hamework x pnMducation.com.hrntpx 20.00 points Consider the following information: e of Return if State Occurs Probability of State of Economy 15 State of Economy Recession Normal Boom Stock A 02 e.10 .15 Stock B 30 18 31 30 Requiremient 1: Calculiaté the expected return for the two stocks. (Do not round intermediate calculations. Enter your swer as a percentage rounded to 2 decimal places (e.g. 32.16).) Expected return E(RA) E(RB) 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 deviation Hints References eBook &Resources;

Explanation / Answer

Answer :

E (RA) = (.02*.15)+(.10*.55)+(.15*.30)=10.30%

E (Rb) =  (-.30*.15)+(.18*.55)+(.31*.30)=14.70%

Da=RA-

E (RA)

Db=RB-

E (Rb)

St. Deviation A = Sq Rt.(.00174555) = 4.18%

St. Deviation b= Sq Rt.(.008289 ) = 9.10 %

RA RB Probability E (RA) E (Rb)

Da=RA-

E (RA)

Da2 Da2 * Prob.

Db=RB-

E (Rb)

Db2 Db2 * Prob. .02 -.30 .15 .1030 .1470 -.083 .006889 .00103335 -.045 .002025 .00030375 .10 .18 .55 .1030 .1470 -.003 .00009 .0000495 .099 .009801 .00539055 .15 .31 .30 .1030 .1470 .047 .002209 .0006627 .093 .008649 .0025947 Sum .00174555 .008289

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