Based on the following information, calculate the expected return and standard deviation and variance for two stocks:
This is what i have so far and i am stuck if someone can check my work so far and help me fill in the rest thanks
State of the Economy | Probability | Rate of Return Stock A | Rate of Return Stock B |
Recession | .25 | .05 | -.19 |
Normal | .50 | .06 | .14 |
Boom | .25 | .10 | .34 |
Stock A | Probability | Return | Product | Return Deviation |
Squared Deviation |
Product |
Recession | 0.25 | 0.05 | 1.2500 | |||
Normal | 0.50 | 0.06 | 3.0000 | |||
Boom | 0.25 | 0.10 | 2.5000 | |||
E(R) = | 6.5000 | Variance = | - | |||
Standard Deviation | 1.92% | |||||
Stock B | Probability | Return | Product | Return Deviation |
Squared Deviation |
Product |
Recession | 0.25 | (0.19) | (47.6188) | |||
Normal | 0.50 | 0.14 | 7.0000 | |||
Boom | 0.25 | 0.34 | 85.0000 | |||
E(R) = | 10.7500 | Variance = | - | |||
Stock A | Probability | Return | Product | Return | Squared | Product |
Deviation | Deviation | |||||
Recession | 0.25 | 0.05 | 1.25 | -1.75 | 3.0625 | 0.765625 |
Normal | 0.5 | 0.06 | 3 | -0.75 | 0.5625 | 0.28125 |
Boom | 0.25 | 0.1 | 2.5 | 3.25 | 10.5625 | 2.640625 |
E(R) = | 6.5 | Variance = | 3.6875 | |||
Standard Deviation | 1.92% | |||||
Stock B | Probability | Return | Product | Return | Squared | Product |
Deviation | Deviation | |||||
Recession | 0.25 | -0.19 | -47.6188 | -29.75 | 885.0625 | 221.265625 |
Normal | 0.5 | 0.14 | 7 | 3.25 | 10.5625 | 5.28125 |
Boom | 0.25 | 0.34 | 85 | 23.25 | 540.5625 | 135.140625 |
E(R) = | 10.75 | Variance = | 361.6875 | |||
Note :
Return Deviation = Probable Return- Expected Return
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