The returns on the common stock of Alpha Cycles, Inc. are quite cyclical. In a boom economy, the stock is expected to return 31.0% in comparison to 11.0% in a normal economy and negative 18.0% in a recessionary period. The probability of a recession is 12% while the probability of a boom is 22%. The remainder of the time the economy will be at normal levels. What is the standard deviation of the returns on this stock?

The returns on the common stock of Alpha Cycles, Inc. are quite cyclical. In a boom economy, the stock is expected to return 31.0% in comparison to 11.0% in a normal economy and negative 18.0% in a recessionary period. The probability of a recession is 12% while the probability of a boom is 22%. The remainder of the time the economy will be at normal levels. What is the standard deviation of the returns on this stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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