Question
We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(r A,s ) E(r B,s
We know the following expected returns for stocks A and B, given different states of the economy:
| State (s) | Probability | E(rA,s) | E(rB,s) |
| Recession | 0.3 | -0.06 | 0.02 |
| Normal | 0.5 | 0.09 | 0.05 |
| Expansion | 0.2 | 0.17 | 0.09 |
The expected return on the market portfolio is 0.07 and the risk-free rate is 0.02.
a) What is the standard deviation of returns for stock A?
b) What is the beta for stock A?
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Finance And Sustainability
Authors: William Sun, Celine Louche, Roland Perez
1st Edition
1780520921, 978-1780520926
