Consider the following information: State of economy Probability of state Rate of return if state occurs of economy Stock A Stock B Recession 0

Finance Oct 17, 2020

Consider the following information:
State of economy Probability of state Rate of return if state occurs

of economy Stock A Stock B

Recession 0.15 0.13 -0.26

Normal 0.30 0.18 0.21

Boom 0.55 0.20 0.24
Calculate the expected return for each stock. (Do not round intermediate calculations. Round the final answers to 2 decimal places).

Calculate the standard deviation for each stock. (Do not round intermediate calculations. Round the final ansveers to 2 decimal places.)

Expert Solution

Expected return for stock A = 17.85%

For stock B = 14.85%

Standard deviation for stock A = 2.22%

For stock B = 17.21%

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