# StanDev - Risk and Return 1 a Given the following economic...

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Risk and Return 1. a) Given the following economic forecast data, calculate the standard deviations for the following two stocks. Return on Stock Economic Condition Probability Orlando Utility Orlando Technology Boom 30% 18% 40% Normal 50% 10% 14% Recession 20% 3% -10% b) Assume these stock returns are normally distributed. Two- thirds of the time, each stock’s annual returns will fall within plus or minus one standard deviation of the expected return. What returns correspond with plus or minus one standard deviation?

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Standard Deviation with Holding-Period Returns Calculating standard deviation using historical stock price data. Previous standard deviation calculations used forecast data and probabilities. In practice, we often use historical price data to estimate standard deviation. Instead of different probabilities, we assume that each return is equally likely. Fill in the following table. The expected return is just the average of the 12 monthly returns.
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