Consider the following information: State of EconomyProbability of State of EconomyRate of Return if State Occurs Stock AStock BRecession.17.08−.12Normal.58.11.17Boom.25.16.34 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.)

a. Expected ReturnMultiply the probability of each state of the economy by the corresponding rate of…

Answered: Consider the following information:…

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...

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Question

Consider the following information:

State of Economy	Probability of State of Economy	Rate of Return if State Occurs

Stock A	Stock B
Recession	.17	.08	−.12
Normal	.58	.11	.17
Boom	.25	.16	.34

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.)