what is the standard deviation on this data boom normal bust probability 0

Finance Apr 19, 2021

what is the standard deviation on this data

boom normal bust

probability 0.2 0.5 0.3

return 20% 8% -25%

Expert Solution

Computation of Standard Deviation:
State of Economy	Probability	Return	*Probability Return**	Return - Expected Return	(Return - Expected Return)^2	*Probability (Return-Expected return)^2**
Boom	0.2	20%	4.00%	19.5000%	0.038025	0.76%
Normal	0.5	8%	4.00%	7.5000%	0.005625	0.28%
Bust	0.3	-25.00%	-7.50%	-25.5000%	0.065025	1.95%
		Expected Return =	0.50%		Variance =	2.99%
					Standard Deviation =	17.30%	=0.28%^(1/2)

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