7.16

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find

Probability

Return

Boom	0.2	25.00%
Good	0.1	15.00%
Level	0.1	10.00%
Slump	0.6	-5.00%

What is the standard deviation of the return on Barbara's investment? (Round intermediate calculations and answer to 5 decimal places, e.g. 0.07680.)

Standard Deviation:

Problem 8.24

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $956.57. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,027.40, what is the yield that Trevor would earn by selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Effective Annual Yield: %