View the step-by-step solution to: The annual returns, in percentages, on stocks A and B for three

The annual returns, in percentages, on s...
This question was answered on Dec 26, 2010. View the Answer
The annual returns, in percentages, on stocks A and B for three possible states of the economy are given in the table below.

Economy State: Good, Probability: 0.5, Stock A: 40 Stock B: 20

Economy State: Average, Probability: 0.3, Stock A: 20 Stock B: 40

Economy State: Bad, Probability: 0.2, Stock A: 10 Stock B: 8


Question: If one invested in StockA, what would be the standard deviation of the percentage return? Place your answer, in percent rounded to 1 decimal place, in the blank. For example, a standard deviation of 10.39 percent would be reported as 10.4. Do not use a percent sign.
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Dear Student, Please find th... View the full answer

6599182.doc

Calculation of Standard Deviation in percentage return for Stock A

Economy
State
Good
Average
Bad

Stock A
(x)
40
20
10

(y-x)

(y-x)²

-16.67 277.88
3.33
11.08
13.37 177.68

Probability
(f)
0.5...

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