Answer is no t 11.62 Use the following information on states of the economy and

Question

Answer is not 11.62

Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. Assuming that all three states are equally likely. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

%  

Answer is not 11.62

Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. Assuming that all three states are equally likely. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Expected Return = (-0.09 x 0.3333) + (0.15 x 0.3333) + (0.24 x 0.3333) = 0.09999 or 9.999%

Standard Deviation = (Variance of stock)1/2

Variance = [(-0.09 – 0.09999)2 x 0.3333] + [(0.15 – 0.09999)2 x 0.3333] + [(0.24 – 0.09999)2 x 0.3333] = 0.01939806

Standard Deviation = (0.01939806)1/2 = 0.139276919

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.