Expected return and standard deviation
Not what you're looking for?
I have completed this problem but wondered if someone would check it for me. Thanks, Victoria
a. What is the expected return of a stock given the following information:
State of Probability Return
Economy
Good .2 20%
Normal .5 12
Poor .3 5
(0.20)(.20)+(.50)(.12)+(.30)(.05) =11.5%
b. What is the standard deviation of returns?
(.2)(.20-0.115)^2 + (.5)(.12-0.115)^2 + (.3)(.5-0.115)^2 =
0.0014450 + 0.0000125 + 0.0444675 = sqrt (0.0459250) =
0.21430 or 21.43%
Purchase this Solution
Solution Summary
The solution explains how to calculate the expected return and the standard deviation of returns
Solution Preview
a. The expected return is correct
b. In standard deviation, the third ...
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.