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    Standard deviation and expected return with probability

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    Consider the following information about Stock I and II:

    State of Probability of Rate of Return if State Occurs
    Economy State of Economy Stock I Stock II
    Recession 0.14 -0.15 -0.15
    Normal 0.12 0.29 0.43
    Irrational ex- 0.74 0.29 0.27
    uberance

    The market risk premium is 8%, and risk-free rate is 2.8%.

    a. What is the standard deviation percent on stock I's expected return and the stock beta?
    b. what is the standard deviation percent on stock II's expected return and the stock beta?
    c. Which stock I or stock II is "riskier"?

    For standard deviation and beta: round answer to 2 decimal places. (eg:32.16)

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    https://brainmass.com/business/business-math/standard-deviation-expected-return-probability-179925

    Solution Summary

    The solution explains the calculation of standard deviation and expected return given the probability and the returns for each state.

    $2.19

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