Question
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession .21 .09
| Consider the following information: |
| State of Economy | Probability of State of Economy | Rate of Return if State Occurs | |
|---|---|---|---|
| Stock A | Stock B | ||
| Recession | .21 | .09 | .16 |
| Normal | .51 | .12 | .13 |
| Boom | .28 | .17 | .30 |
a. | Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
b. | Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
a To calculate the expected return for Stocks A and B we use the formula ER sumi1n PiRi Where ER is ...
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Step: 2
Step: 3
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
5th edition
1259289907, 978-1259289903
