You recently purchased a stock that is expected to earn 40 percent in abooming economy, 20 percent in a normal economy, and lose 30 percentin a recessionary economy. There is a 20 percent probability of a boomand a 70 percent chance of a normal economy. What is the expectedstandard deviation of returns on this stock?
You recently purchased a stock that is expected to earn 40 percent in abooming economy, 20 percent in a normal economy, and lose 30 percentin a recessionary economy. There is a 20 percent probability of a boomand a 70 percent chance of a normal economy. What is the expectedstandard deviation of returns on this stock?
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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You recently purchased a stock that is expected to earn 40 percent in a
booming economy, 20 percent in a normal economy, and lose 30 percent
in a recessionary economy. There is a 20 percent probability of a boom
and a 70 percent chance of a normal economy. What is the expected
standard deviation of returns on this stock?
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