You have been given the following information: Rate of Return If State Occurs State ofProbability of EconomyState of EconomyStock AStock B Recession .25 .06 −.20 Normal .55 .07 .13 Boom .20 .11 .33 a.Calculate the expected return for the two stocks. (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 the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

The expected rate of return is the average amount of interest that investing in stock provides while…

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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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You have been given the following information:

		Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy	Stock A	Stock B
Recession		.25		.06	−	.20
Normal		.55		.07		.13
Boom		.20		.11		.33

a.	Calculate the expected return for the two stocks. (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 the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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