Fill This Form To Receive Instant Help
Homework answers / question archive / Based on on the following information calcuate the expected return and standard deviation for Stock A aand Stock B: Rate of Return if state Occurs Rate Of return If state Occurs State Of Economy Probability of State of Economy Stock A Stock B Recession
Based on on the following information calcuate the expected return and standard deviation for Stock A aand Stock B:
Rate of Return if state Occurs | Rate Of return If state Occurs | |||
State Of Economy | Probability of State of Economy | Stock A | Stock B | |
Recession | .10 | .04 | -.17 | |
Normal | .60 | .09 | .12 | |
Boom | .30 | .17 | .27 |
Please show work and formula
Stock A | |||||
Scenario | Probability | Return% | =rate of return% * probability | Actual return -expected return(A)% | (A)^2* probability |
Recession | 0.1 | 4 | 0.4 | -6.9 | 0.0004761 |
Normal | 0.6 | 9 | 5.4 | -1.9 | 0.0002166 |
Boom | 0.3 | 17 | 5.1 | 6.1 | 0.0011163 |
Expected return %= | sum of weighted return = | 10.9 | Sum=Variance Stock A= | 0.00181 | |
Standard deviation of Stock A% | =(Variance)^(1/2) | 4.25 | |||
Stock B | |||||
Scenario | Probability | Return% | =rate of return% * probability | Actual return -expected return(A)% | (B)^2* probability |
Recession | 0.1 | -17 | -1.7 | -30.6 | 0.0093636 |
Normal | 0.6 | 12 | 7.2 | -1.6 | 0.0001536 |
Boom | 0.3 | 27 | 8.1 | 13.4 | 0.0053868 |
Expected return %= | sum of weighted return = | 13.6 | Sum=Variance Stock B= | 0.0149 | |
Standard deviation of Stock B% | =(Variance)^(1/2) | 12.21 |