Use the following information on states of the economy and stock returns to calc
ID: 2650198 • Letter: U
Question
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. Assuming that all three states are equally likely. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. Assuming that all three states are equally likely. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
Mean return = (-8.5 + 15 + 25) / 3 = 10.5%
Variance of mean return = [(-8.5 - 10.5)2 + (15 - 10.5)2 + (25 - 10.5)2] / 3 = 197.17
Standard deviation of the mean return = 197.171/2 = 14.04%