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After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of a poor
After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of a poor economy. If the economy is good, you estimate that a stock you have been following would have a 21% return. Likewise, if the economy is poor, you estimate a -6% return for that same stock. The risk-free rate is 4.5%. What is the standard deviation of the expected returns for this stock? (Answer to the nearest tenth of a percent, but do not use a percent sign). Probability Return Good Economy 70% Poor Economy 30% 21% -6% Risk-Free Rate = 4.5
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