QUESTION 1

The following table details an analyst's prediction of the probabilities of different states of the market over the next year, along with the forecast returns on security XYZ in each different market state. Calculate the expected return and standard deviation of returns on security XYZ.

State Probability Return

Very good 0.1 31%

Good 0.3 13%

Average 0.4 12%

Bad 0.2 -9%