Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Elizabeth is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is

Elizabeth is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment.

Probability Return
Boom 0.2 25.00%
Good 0.2 15.00%
Level 0.4 10.00%
Slump 0.2 -5.00%

Use the table of returns and probabilities above to determine the expected return on Elizabeths investment? (Round answer to 3 decimal places, e.g. 0.076.)

Expected return

Use the table of returns and probabilities above to determine the standard deviation of the return on Elizabeth's investment? (Round answer to 5 decimal places, e.g. 0.07680.)

Standard deviation

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Nonprofit Organizations Policies And Practices

Authors: Jo Ann Hankin, John Zietlow, Alan Seidner, Tim O'Brien

3rd Edition

1119382564, 9781119382560

More Books

Students also viewed these Finance questions

Question

=+a) What were the subjects?

Answered: 1 week ago