Question G

Given the following probable states of the economy and the expected return on a security in each state:

State of economy Probability Return Recession 0.20 -1.5% Normal 0.55 6% Boom 0.25 8%

Required: i. What is the expected return on the security? (4 marks) ii. What is the standard deviation on the security? (6 marks) iii. Coefficient of variation (2 marks)