Derive the expected returns and the standard deviation of returns for the two assets above.
Derive the expected returns and the standard deviation of returns for the two assets above.
College Algebra
7th Edition
ISBN:9781305115545
Author:James Stewart, Lothar Redlin, Saleem Watson
Publisher:James Stewart, Lothar Redlin, Saleem Watson
Chapter9: Counting And Probability
Section9.4: Expected Value
Problem 1E: If a game gives payoffs of $10 and $100 with probabilities 0.9 and 0.1, respectively, then the...
Related questions
Question
Consider the case of two financial assets and three market conditions (states). The table
below gives the respective probability for each market condition and the return of each asset
in each one of them.
Market Conditions
State | Recession | Normal | Expansion |
Probability of state | 30% | 40% | 30% |
Return of asset A | -30% | 20% | 55% |
Return of asset B | -10% | 70% | 0% |
a. Derive the expected returns and the standard deviation of returns for the two assets
above.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
College Algebra
Algebra
ISBN:
9781305115545
Author:
James Stewart, Lothar Redlin, Saleem Watson
Publisher:
Cengage Learning
College Algebra
Algebra
ISBN:
9781305115545
Author:
James Stewart, Lothar Redlin, Saleem Watson
Publisher:
Cengage Learning