Based on the following information: Rate of Return If State Occurs State of Prob

Question

Based on the following information: Rate of Return If State Occurs State of Probability of Economy State of Stock A Stock B Economy Recession .15 .06 -.10 Normal .56 .09 .19 Boom .29 .14 .36 Calculate the expected return for the two stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Expected return Stock A % Stock B Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and round your answers to 2 decimal places. (e.g., 32.16)) Standard deviation Stock A Stock B %

Explanation / Answer

expected return on stock A = (0.15X0.06+0.59X0.09+0.29X0.14)= 10.27%

return from B= (0.15X-0.10+0.59X0.19+0.29X0.36)= 19.58%

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