1. Based on the following information, what is standard deviation for the stock? Please answer with a decimal number. Do NOT answer in %. Probability Return Recession 0.20 0.05 Normal 0.55 0.08 Boom 0.14
1. Based on the following information, what is standard deviation for the stock? Please answer with a decimal number. Do NOT answer in %. Probability Return Recession 0.20 0.05 Normal 0.55 0.08 Boom 0.14
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What is the standard deviation for the stock?
Transcribed Image Text:1. Based on the following information, what is standard deviation for the stock? Please answer with a decimal number. Do NOT
answer in %.
Probability Return
Recession 0.20
0.05
Normal
0.55
0.08
Boom
0.14
Expert Solution
Step 1
Variance = {(Expected return - Given return)2 * Probability+ (Expected return - Given return)2 * Probability}
Standard deviation = Square root of the variance
The probability of all the factor is always = 1
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