Question
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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