Can someone please help me solve for the standard deviation? Thx! Based on the f

Question

Can someone please help me solve for the standard deviation? Thx!

Based on the following information, the expected return and standard deviation for Stock A are 7.8 percent and percent, respectively. The expected return and standard deviation for Stock B are percent and percent, respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (eg, 32.16)) Rate of Return if State Occurs Stock B State of Economy Recession Normal Boom Probability of State of Economy 0.2 0.7 0.1 Stock A 0.04 0.08 0.14 0.22 0.13 0.33

Explanation / Answer

Standard deviation is the square root of sum of squared deviations from the mean times the probability

Stock A:

Std dev = (0.2*(0.078-0.04)^2 + 0.7*(0.078-0.08)^2 + 0.1*(0.078-0.14)^2)^(1/2) = 0.0260 = 2.60%

Stock B:

Std dev = (0.2*(0.08+0.22)^2 + 0.7*(0.08-0.13)^2 + 0.1*(0.08-0.33)^2)^(1/2) = 0.1612 = 16.12%

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---