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.
Dear Student, Please find the attached solution. Regards
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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)
-16.67 277.88
3.33
11.08
13.37 177.68
Probability
(f)
0.5...