Question
You have been given the following predictions about the return on a stock investment: Economy Probability of State of the Economy Return Severe recession .10
You have been given the following predictions about the return on a stock investment:
Economy | Probability of State of the Economy | Return |
Severe recession | .10 | (.20) |
Mild recession | .30 | (.10) |
Normal growth | .40 | .20 |
Boom | .20 | .30 |
a. What is the stocks expected return? (Rounding: Do not round intermediate calculations. Enter your final answer as a decimal with four decimal places, e.g., if your answer is 9.5%, you would enter .0950.)
b. What is the stocks standard deviation? (Rounding: Do not round intermediate calculations. Enter your final answer as a decimal with four decimal places, e.g., if your answer is 9.5%, you would enter .0950.)
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