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Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability

Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability of a boom economy is 10%, the probability of a stable growth economy is 15%, the probability of a stagnant economy is 50%, and the probability of a recession is 25%. Use the table below to compute the following three questions:

Estimate the expected returns on stock in percentage for the coming year.

INVESTMENT

Forecasted Returns for Each Economy

Boom

Stable Growth

Stagnant

Recession

Stock

25%

12%

4%

-12%

Corporate Bond

9%

7%

5%

3%

Government Bond

8%

6%

4%

2%

1- Using the data from the previous problem, calculate the standard deviation of stock, in percentage.

2-

Using the data from the previous problem, calculate the standard deviation of corporate bond, in percentage

3-

Using the data from the previous problem, calculate the standard deviation of Government bond, in percentage.

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