Based on the following information, calculate the expected return and standard deviation for the two stocks: State

Question:

Based on the following information, calculate the expected return and standard deviation for the two stocks:

State of Economy Probability of State of Economy Rate of Return If State Occurs

Stock A Stock B

Recession ................. 15 ......................................... 04 ................... -.17

Normal .................... 55 ......................................... 09 .................... .12

Boom ..................... 30 ......................................... 17 .................... .27

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...