Based on the following information, what is the standard deviation of returns? Probability of State of Economy Rate of Return if State of Economy State Occurs Recession .24 -.092 Normal .45 .107 Воom .31 .217

Based on the following information, what is the standard deviation of returns? Probability of State of Economy Rate of Return if State of Economy State Occurs Recession .24 -.092 Normal .45 .107 Воom .31 .217

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 6P: The market and Stock J have the following probability distributions: a. Calculate the expected rates...

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Based on the following information, what is the standard deviation of returns?
Probability of State
of Economy
Rate of Return if
State of Economy
State Occurs
Recession
.24
-.092
Normal
.45
.107
Boom
.31
.217

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