Question
Following are three possible states of the economy for the next year, and their probabilities of occurring. In the last column of the table are
Following are three possible states of the economy for the next year, and their probabilities of occurring. In the last column of the table are possible rates of return for Nonlinear Dynamics, Corporation in each state of the economy. For example, under normal economic growth, the firm should have a return of 9% per year. There is a 50% chance for normal economic growth. Calculate the standard deviation for the firm's stock returns. State of Economy Probability Rate of Return Recession 20% -10% Normal growth 50% 9% High growth 30% 16% TOTAL A. 7.30% B. 5.00% C. 9.17% D. 4.39% E. 9.66%
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