NOTE>> Please answer the question as you read and see it. DO NOT PROVIDE referen
ID: 2383425 • Letter: N
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NOTE>> Please answer the question as you read and see it. DO NOT PROVIDE references of how to solve it. Simply answer the question as you read and see it. It's one WHOLE complete math probelm. Good Luck!!
Part C: Use the information in the following table to answer the questions below. Probability of State State of Economy Boom Normal Recession Return on A in State 0.040 0.040 0.040 Return on B in State 0.210 0.080 0.010 Return on C in State 0.300 0.200 0.260 .50 .15 What is the expected return of each asset? What is the variance of each asset? What is the standard deviation of each asset?Explanation / Answer
a. Calculation of Expected Return : Asset- A State of Economy Probability Return A*B A B Boom 0.35 0.040 0.014 Normal 0.50 0.040 0.020 Recession 0.15 0.040 0.006 Expected return (Sum) 0.040 Asset- B State of Economy Probability Return A*B A B Boom 0.35 0.210 0.074 Normal 0.50 0.080 0.040 Recession 0.15 (0.010) (0.002) Expected return (Sum) 0.112 Asset- C State of Economy Probability Return A*B A B Boom 0.35 0.300 0.105 Normal 0.50 0.200 0.100 Recession 0.15 (0.260) (0.039) Expected return (Sum) 0.166 b. Calculation of variance: Asset- A State of Economy Probability Return Expected return Deviation Deviation Square A B C D=B-C D^2 A*D^2 Boom 0.35 0.040 0.040 - 0 - Normal 0.50 0.040 0.040 - 0 - Recession 0.15 0.040 0.040 - 0 - Variance (Sum) - Asset- B State of Economy Probability Return Expected return Deviation Deviation Square A B C D=B-C D^2 A*D^2 Boom 0.35 0.210 0.112 0.098 0.009604 0.003 Normal 0.50 0.080 0.112 (0.032) 0.001024 0.001 Recession 0.15 (0.010) 0.112 (0.122) 0.014884 0.002 Variance (Sum) 0.006 Asset- C State of Economy Probability Return Expected return Deviation Deviation Square A B C D=B-C D^2 A*D^2 Boom 0.35 0.300 0.166 0.134 0.017956 0.006 Normal 0.50 0.200 0.166 0.034 0.001156 0.001 Recession 0.15 (0.260) 0.166 (0.426) 0.181476 0.027 Variance (Sum) 0.034 c. Calculation of standard Deviation Asset- A Standard Deviation = (Variance)^(1/2) Standard Deviation = (0)^(1/2) 0 Asset- B Standard Deviation = (Variance)^(1/2) Standard Deviation = (0.006)^(1/2) 0.0781 Asset- C Standard Deviation = (Variance)^(1/2) Standard Deviation = (0)^(1/2) 0.1846
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