Variance and standard deviation (expected). Bacon and Associates, a famous Northwest think tank, has provided probability estimates for the four potential economic states for the coming year in the following table: E. The probability of a boom economy is 25%, the probability of a stable growth economy is 45%, the probability of a stagnant economy is 25%, and the probability of a recession is 5%. Calculate the variance and the standard deviation of the three investments: stock, corporate bond, and government bond. If the estimates for both the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose, considering both risk and return? Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type. What is the variance of the stock investment? Data Table % (Round to five decimal places.) What is the standard deviation of the stock investment? (Click on the following icon in order to copy its contents into a spreadsheet.) % (Round to two decimal places.) What is the variance of the corporate bond investment? % (Round to five decimal places.) Boom Forecasted Returns for Each Economy Stable Growth Stagnant 13% 4% 7% 5% 6% 4% Investment Stock Corporate bond Government bond 24% Recession - 10% 3% 2% What is the standard deviation of the corporate bond investment? 9% 8% % (Round to two decimal places.) What is the variance of the government bond investment? Print Done % (Round to five decimal places.) What is the standard deviation of the government bond investment? % (Round to two decimal places.) If the estimates for both the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose, considering both risk and return? (Select the best response.) O A. The corporate bond would be the best choice because it has the highest expected return and the lowest risk. OB. The government bond would be the best choice because it has the lowest risk. O C. The stock investment would be the best choice because it has the highest volatility and therefore the best chance of a high return