Variance and standard deviation (expected). Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year in the following table:. The probability of a boom economy is 15%, the probability of a stable growth economy is 20%, the probability of a stagnant economy is 52%, and the probability of a recession is 13%. Calculate the variance and the standard deviation of the three investments: stock, corporate bond, and government bond. If the estimates for both the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose, considering both risk and return? Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type. What is the variance of the stock investment? % (Round to six decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Investment Stock Corporate bond Government bond Boom 28% 9% 8% Forecasted Returns for Each Economy Stable Growth 13% 8% 7% Stagnant 6% 6% 5% Recession - 12% 3% 2% - X

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
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Variance and standard deviation (expected). Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the
coming year in the following table: The probability of a boom economy is 15%, the probability of a stable growth economy is 20%, the probability of a stagnant economy is 52%, and
the probability of a recession is 13%. Calculate the variance and the standard deviation of the three investments: stock, corporate bond, and government bond. the estimates for both
the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose, considering both risk and return?
.
Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers
you will type.
What is the variance of the stock investment?
% (Round to six decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Investment
Stock
Corporate bond
Government bond
Boom
28%
9%
8%
Forecasted Returns for Each Economy
Print
Stable
Growth
13%
8%
7%
Done
Stagnant
6%
6%
5%
Recession
- 12%
3%
2%
X
Transcribed Image Text:Variance and standard deviation (expected). Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year in the following table: The probability of a boom economy is 15%, the probability of a stable growth economy is 20%, the probability of a stagnant economy is 52%, and the probability of a recession is 13%. Calculate the variance and the standard deviation of the three investments: stock, corporate bond, and government bond. the estimates for both the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose, considering both risk and return? . Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type. What is the variance of the stock investment? % (Round to six decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Investment Stock Corporate bond Government bond Boom 28% 9% 8% Forecasted Returns for Each Economy Print Stable Growth 13% 8% 7% Done Stagnant 6% 6% 5% Recession - 12% 3% 2% X
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