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P13-7 Calculating Returns and Standard Deviations [LO1] Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy

P13-7 Calculating Returns and Standard Deviations [LO1]

Consider the following information:

Rate of Return if State Occurs
State of Economy Probability of State of Economy Stock A Stock B
Recession 0.20 0.04 -0.17
Normal 0.50 0.07 0.13
Boom 0.30 0.15 0.34
Required:
(a)

Calculate the expected return for Stock A. (Do not round your intermediate calculations.)

8.80%

8.62%

9.15%

9.24%

8.69%

(b)

Calculate the expected return for Stock B. (Do not round your intermediate calculations.)

13.83%

13.30%

10.00%

12.64%

13.96%

(c)

Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.)

4.21%

4.42%

4.00%

2.98%

4.38%

(d)

Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)

17.67%

16.79%

12.49%

18.38%

18.55%

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