Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Stock B Economy .22 Recession .07 -.22 Normal .52 .10 .07 Boom .26 .15 .24 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
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Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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Part a only
Consider the following information:
Rate of Return If State Occurs
State of Probability of
State of
Economy
Stock A
Stock B
Economy
Recession
.22
.07
-.22
Normal
.52
.26
.10
.07
Вoom
15
.24
a. Calculate the expected return for Stocks A and B. (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
b. Calculate the standard deviation for Stocks A and B. (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Answer is complete but not entirely correct.
Stock A expected return
Stock B expected return
Stock A standard
а.
10.64
2.59 X %
b.
deviation
14.72
Stock B standard
16.01
%
deviation
Transcribed Image Text:Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Stock B Economy Recession .22 .07 -.22 Normal .52 .26 .10 .07 Вoom 15 .24 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Stock A expected return Stock B expected return Stock A standard а. 10.64 2.59 X % b. deviation 14.72 Stock B standard 16.01 % deviation
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