Question
Use the following scenario analysis for stocks X and Y to answer the questions. Bear Normal...
Use the following scenario analysis for stocks X and Y to answer the questions.
| Bear | Normal | Bull | |
| Market | Market | Market | |
| Probability | 20.00% | 45.00% | 35.00% |
| Stock X | -13.00% | 11.00% | 28.00% |
| Stock Y | -26.00% | 16.00% | 46.00% |
What is the standard deviation of return for stock X?
Homework Answers
Answer #1
Calculating the standard deviation of return for stock X:-
| Market | Prob (P) | Stock X [(X)] | (P)*[(X)] | Deviation [R-R(X)] | [R-R(X)]^2 | {[R-R(X)]^2}*(P) |
| Bear | 0.20 | -13.00 | -2.60000 | -25.1500 | 632.5225 | 126.50450 |
| Normal | 0.45 | 11.00 | 4.95000 | -1.1500 | 1.3225 | 0.59512 |
| Bull | 0.35 | 28.00 | 9.80000 | 15.8500 | 251.2225 | 87.92788 |
| R(X) = 12.15000 | 215.02750 |
Mean Return of Stock X, R(X) 
= 12.15%
Standard Deviation of Stock X 
= 14.66%
So, the standard deviation of return for stock X is 14.66%
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