The economy of Pakistan is experiencing lots of fluctuations during the new government. Following information is extracted from a well-known company. State of pakistan economy probability  rate of return Depression  10 10.5% Recession  25 5.9% Normal  45 13% Boom 20 21.1% You are required to calculate the following  What will be the expected return?  Calculate the variance of the above data.  Calculate the standard deviation.

Intermediate Financial Management (MindTap Course List)
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ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk
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Problem 11P: Scenario Analysis Shao Industries is considering a proposed project for its capital budget. The...
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The economy of Pakistan is experiencing lots of fluctuations during the new government. Following information is extracted from a well-known company.

State of pakistan economy probability  rate of return
Depression  10 10.5%
Recession  25 5.9%
Normal  45 13%
Boom 20 21.1%

You are required to calculate the following 

What will be the expected return? 

Calculate the variance of the above data. 

Calculate the standard deviation. 

 

Expert Solution
Step 1

Expected rate of return, variance and standard deviation of a company under various economy is calculated using the below formula:

Finance homework question answer, step 1, image 1

Step 2

Expected Return,variance and standard deviation is calculated as below;
Excel Workings:

Finance homework question answer, step 2, image 1

 

 

Result:

Finance homework question answer, step 2, image 2

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