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After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy
After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy 50%, and a bust economy a 20% chance of occurring. You also estimate that a certain stock would have a return of 32% in a boom economy next year, 17% in a neutral economy , and -14% in a bust economy. The risk-free rate is 4.6%. What is the standard deviation of expected returns for this stock next year? (Answer to the nearest tenth of a percent, but do not use a percent sign).
Probability | Return | |
Boom Economy | 30% | 32% |
Neutral Economy | 50% | 17% |
Bust Economy | 20% | -14% |
Risk-Free Rate= 4.6%
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