Calculate the expected return for Stock A. Calculate the expected return for Sto

Question

Calculate the expected return for Stock A.

  

Calculate the expected return for Stock B.

  

Calculate the standard deviation for Stock A.

  

Calculate the standard deviation for Stock B.

(a)

Calculate the expected return for Stock A.

  

(b)

Calculate the expected return for Stock B.

  

(c)

Calculate the standard deviation for Stock A.

  

(d)

Calculate the standard deviation for Stock B.

Consider the following information Rate of Return if State Occurs State of Economy Recession Normal Boom Probability of State of Economy 0.10 0.50 0.40 Stock A 0.05 0.08 0.11 Stock B 0.20 0.15 0.36

Explanation / Answer

a)

The correct answer is 8.90%

b)

Hence the correct answer is 19.90%

c)

The correct answer is 1.92

d)

The correct answer is 16.58

` Probability Stock A Expected Return A ( Probability * Expected Return) Recession 0.10 0.05 0.0050 Normal 0.50 0.08 0.0400 Boom 0.40 0.11 0.0440 Expected Return  A 0.0890 Expected Return  A % 8.90

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