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14- Consider the following three state of the worlds (bad, average, and good) and the performance for CD Return, Government Bonds, and Stocks. State CD

14-

Consider the following three state of the worlds (bad, average, and good) and the performance for CD Return, Government Bonds, and Stocks.

State CD Return Bond Return Stock Return
1. Good 2% 4% 15%
2. Average 2% 3% 7%
3. Bad 2% 1% -5%

If Goldman Sachs revises the probability of a good state to only 25%, average state to 20%, and and the probability of a bad state to 55%, what is the new standard deviation of the return for Stocks? (round to two digits, e.g. 5.18%)

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