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QUESTION 27 After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of
QUESTION 27 After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of a poor economy if the economy is good you estimate that a stock you have been following would have a 14% return. Likewise if the economy is poor, you estimate a 8% return for that same stock. The risk-free rate is 4 7% What is the standard deviation of the expected returns for this stock? (Answer to the nearest tenth of a percent, but do not use a percent sign). ProbabilityReturn Good Economy Poor Economy 70% 30% 14% -8% Risk-Free Rate 47 QUESTION 28 After some study of the economy. your forecast for next year is that a boom economy has a 30% chance of occurring a neutral economy 50%, and a bust economy a 20% chance of occurring. You also estimate that a certain stock would haye a return of 34% in a boom economy next year, 18%in a neutral economy , and-11% in a bust economy The risk-free rate is 4.1% what is the sta dard deviation of expected returns for this stock next year? Answer to the nearest tenth of a percent, but do not use a percent sign). Probability Return Boom Economy Neutral Economy Bust Economy 30% 34% 1896 -11% 50% 20% Risk-Free Rate-41%
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