The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 20 percent in comparison to 12 percent in a normal economy and a negative 10 percent in a recessionary period. The probability of a recession is 15 percent while the probability of a boom is 25 percent. What is the standard deviation of the returns on this stock?

The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 20 percent in comparison to 12 percent in a normal economy and a negative 10 percent in a recessionary period. The probability of a recession is 15 percent while the probability of a boom is 25 percent. 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 14P

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