Question
Consider the following two stocks. Probabilities ( pi pi ) Stock a Stock b Recession p1= p1= 40% -2% 5% Normal p2= p2= 37% 2%
Consider the following two stocks.
| Probabilities (pipi ) | Stock "a" | Stock "b" | |
| Recession | p1=p1= 40% | -2% | 5% |
| Normal | p2=p2= 37% | 2% | -13% |
| Boom | p3=p3= 23% | 15% | 21% |
What is the expected return of each stock? Enter your answers as a percentage rounded to 2 decimal places. Do not enter the percentage sign in your answer.
ra= Correct response: 3.390.01
rb= Correct response: 2.020.01
Using the correct answers from the previous question, what is the standard deviation of each stock? Enter your answer as a percentage rounded to 2 decimal places. Do not enter the percentage sign in your answer.
SDa=
SDb=
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Financial Accounting A Focus On Interpretation And Analysis
Authors: Richard F Kochanek, A Douglas Hillman
7th Edition
1111061750, 9781111061753
