Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The rate of return for a stock is 4% if the state of the economy is recession, 11% if the state of the economy is

The rate of return for a stock is 4% if the state of the economy is recession, 11% if the state of the economy is normal, and 14% if the state of the economy is expansion. The probability for each state of the economy is 25%, 55%, and 20%, respectively. If the stock has an expected rate of return of 9.85%, what is the variance for this stock?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets and Institutions

Authors: Frederic S. Mishkin, Stanley G. Eakins

5th edition

321280299, 321280296, 978-0321280299

More Books

Students also viewed these Finance questions