QUESTION 28

1. 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 have a return of 31% in a boom economy next year, 16% in a neutral economy , and -14% in a bust economy. The risk-free rate is 4.4%. What is the standard deviation of expected returns for this stock next year? (Answer to the nearest tenth of a percent, but do not use a percent sign).
4. Probability
5. Return
9. Boom Economy
10. 30%
11. 31%
12. Neutral Economy
13. 50%
14. 16%
15. Bust Economy
16. 20%
17. -14%
19. Risk-Free Rate = 4.4%