c.unsystematic, systematic o d unsystematic, co-movement QUESTION 9 below. What

Question

c.unsystematic, systematic o d unsystematic, co-movement QUESTION 9 below. What is the expected return? (Show your work. Label%. Two decimal places required. Highlight or bold your answer.) hat's the expected varance? (Show your work your answer) Label %. Two decimal places required. Highlight or bold your answer) what is the expeded standard deviat on ces required. Highlight or bold Probability. Outcome Recession Expansion Boom 40% 25% 35% Return 25% 20% 45% T T T Arial Words Path: p QUESTION 10 Modern financial markets are

Explanation / Answer

Calculation of expected return: State of Economy' Probability(a) Return(%) (b) (a)*(b) Recession 0.4 -25 -10 Expansion 0.25 20 5 Boom 0.35 45 15.75 Expected Return 10.75 Expected return is 10.75% Calculation of standard deviation: State Probability(a) Return(%) (b) (return- expected return) (return- expected return)^2 (b) (a*b) Recession 0.4 -25 -35.75 1278.0625 511.225 Expansion 0.25 20 9.25 85.5625 21.39063 Boom 0.35 45 34.25 1173.0625 410.5719 943.19 Standard deviation= (943.19)^1/2= 30.71% Standard deviation= 30.71%

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