If the economy recovers next year, analysts expect Stock Xs return for the year to be 20%;

Question:

If the economy recovers next year, analysts expect Stock X’s return for the year to be 20%; if the economy does not recover, analysts expect Stock X’s return for the year to be −5%. If there is a 40% chance that the economy will recover and a 60% that it will not, what is:

a. The expected return on Stock X for next year?

b. The standard deviation of the return on Stock X for next year?

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