P13-7 Calculating Returns and Standard Deviations [LO1] Consider the following i

Question

P13-7 Calculating Returns and Standard Deviations [LO1]

Consider the following information:

  

  

Calculate the expected return for Stock A. (Do not round your intermediate calculations.)

  

Calculate the expected return for Stock B. (Do not round your intermediate calculations.)

  

Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.)

  

Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)

Consider the following information:

Explanation / Answer

a)

The correct answer is 8.90%

b)

The correct answer is 13.70%

c)

Standard Deviation = Square Root of Variance

Hence the correct answer is 3.39

d)

Hence the correct answer is 14.50

` Probability Stock A Expected Return A ( Probability * Expected Return) Recession 0.10 0.03 0.0030 Normal 0.70 0.08 0.0560 Boom 0.20 0.15 0.0300 Expected Return  A 0.0890 Expected Return  A % 8.90

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