1. The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 25 percent while the probability of a boom is 10 percent and normal period is 65%. a. What is the expected returned of the stock? b. What is the variance of the stock? C. What is the standard deviation of the returns on this stock?

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1. The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is
expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a
recessionary period. The probability of a recession is 25 percent while the probability of a boom is 10 percent
and normal period is 65%.
a. What is the expected returned of the stock?
What is the variance of the stock?
c. What is the standard deviation of the returns on this stock?
Transcribed Image Text:1. The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 25 percent while the probability of a boom is 10 percent and normal period is 65%. a. What is the expected returned of the stock? What is the variance of the stock? c. What is the standard deviation of the returns on this stock?
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