Question
Calculate the return and standard deviation for the following stock, in an economy with five possible states. If a Boom (Probability=15%) economy occurs, then the
Calculate the return and standard deviation for the following stock, in an economy with five possible states.
If a Boom (Probability=15%) economy occurs, then the expected return is 40%.
If a Good (Probability=25%) economy occurs, then the expected return is 20%.
If a Normal (Probability=30%) economy occurs, then the expected return is 12%.
If a Bad (Probability=20%) economy occurs, then the expected return is 0%.
If a Recession (Probability=10%) economy occurs, then the expected return is -15%.
Show your work please
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
