Question

Calculate the standard deviation of returns of Stock Q, given the following information.

State	Stock return	Probability of state
Recession	–5%	25%
Normal	10%	50%
Boom	25%	25%

Select one:

a. 10.61%

b. 9.53%

c. 8.96%

d. 7.33%

e. 6.30%

Answer 1

The correct answer is a.10.61%

Let the stock returns be X and probability be P