Question

Leftover stock is expected to return 26 percent in a boom, 4 percentin a normal economy,...

Leftover stock is expected to return 26 percent in a boom, 4 percentin a normal economy, and lose 25 percent in a recession. The probabilities of a boom, normal economy, and a recession are 2 percent, 93 percent, and 5 percent, respectively.

What is the expected return on this stock?

a.3.99 percent

b. 2.99 percent

c. 1.99 percent

d.0.99percent

What is the variance on this stock?

a. 0.005071

b. 0.004927

c.0.003896

d.0.005001

What is the standard deviation of the returns on this stock?

a. 7.19percent

b. 7.12percent

c. 7.24percent

d.7.04percent

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Answer #1

variance = .005071

c)standard deviation of the returns on this stock

=

=7.12%

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