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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 26% return. Likewise, if the economy is poor, you estimate a -17% return for that same stock. The risk-free rate is 4.8%. 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% | 26% |
Poor Economy | 30% | -17% |
Risk-Free Rate=4.8
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