You live in a world where three future states are possible: Boom, Normal and Recession. See the probablities of these states in the attched table. Consider a stock which you expected to have the following returns in these states of the economy. State Probability Return 2.79 25% Normal 55% Recession 20% -0.04 What is the standard deviation of returns on an investment in this stock? Boom O 6.52% 6.37% 4.62% State 7.17% Expected 0.15 0.08

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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You live in a world where three future states are possible: Boom, Normal and Recession. See the probablities of these states in the attched table. Consider a stock which you expected to have the following returns
in these states of the economy.
State Probability
Boom
Normal
Recession
O 6.52%
οιοιοι
What is the standard deviation of returns on an investment in this stock?
6.37%
○ 4.62%
25%
55%
20%
O 7.17%
State
Expected
Return
0.15
0.08
-0.04
Transcribed Image Text:You live in a world where three future states are possible: Boom, Normal and Recession. See the probablities of these states in the attched table. Consider a stock which you expected to have the following returns in these states of the economy. State Probability Boom Normal Recession O 6.52% οιοιοι What is the standard deviation of returns on an investment in this stock? 6.37% ○ 4.62% 25% 55% 20% O 7.17% State Expected Return 0.15 0.08 -0.04
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