The market and Stock J have the following probability distributions: Calculate t

Question

The market and Stock J have the following probability distributions:

Calculate the expected rate of return for the market. Round your answer to two decimal places.
%

Calculate the expected rate of return for Stock J. Round your answer to two decimal places.
%

Calculate the standard deviation for the market. Do not round intermediate calculations. Round your answer to two decimal places.
%

Calculate the standard deviation for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.
%

Probability rM rJ 0.3 15% 18% 0.4 8 4 0.3 18 11

Explanation / Answer

The the expected rate of return for the market is 13.10%

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The expected rate of return for Stock J = 10.30%

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The standard deviation for the market = 4.32%

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The standard deviation for Stock J= 5.81%

Probability Rm Expected Return ( Probability * Expected Return) Boom 0.30 0.15 0.05 Normal 0.40 0.08 0.03 Bust 0.30 0.18 0.05 Expected Return   0.131000 Expected Return   % 13.10

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