Use the following information: Stock A B Good state 10% 14% Bad state 2% -2% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the standard deviation of stock A? (Please use 5 decimal places, this should be written in percentage, so an answer of 23.143% should be written as .23143)
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Use the following information: Stock A B Good state 10% 14% Bad state 2% -2% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the standard deviation of stock A? (Please use 5 decimal places, this should be written in percentage, so an answer of 23.143% should be written as .23143)
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