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Sentevey Inc's bonds are highly sought after. A client has asked you what the expected return for the company's bond will be at the end
Sentevey Inc's bonds are highly sought after. A client has asked you what the expected return for the company's bond will be at the end of 1 year. If the economy remains status quo the returns will be 7%. There is a 20% chance that things will remain status quo. There is a 40% chance that there will be an economic boom and the returns will be 17%. However, some economists predict that there is a 60% probability that there will be an economic downturn and that returns will be approximately 3%. Based on these estimates, compute the expected return and standard deviation. O Expected Return = 10%; Standard Deviation = 7.13% Expected Return = 10%; Standard Deviation = 5.08% O Expected Return = 7.12%; Standard Deviation = 5.08% O Expected Return = 10%; Standard Deviation = 10%
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