You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession 0.1 -0.05 Normal 0.5 0.06 Expansion 0.4 0.11 What is the expected return for the stock? What is the standard deviation of returns for the stock?
You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession 0.1 -0.05 Normal 0.5 0.06 Expansion 0.4 0.11 What is the expected return for the stock? What is the standard deviation of returns for the stock?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 1P
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You've estimated the following expected returns for a stock, depending on the strength of the economy:
State (s) | Probability | Expected return |
Recession | 0.1 | -0.05 |
Normal | 0.5 | 0.06 |
Expansion | 0.4 | 0.11 |
What is the expected return for the stock?
What is the standard deviation of returns for the stock?
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