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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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