expected return, variance, and standard deviation
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Given the data below, calculate the expected return, variance, and standard deviation of the following company.
In a recessionary economy, which is expected to occur with a 30% probability, the expected returns would be -5%
In an expanding economy, with an expected probability of occurrence of 20% the expected return would be 10%
In a normal economy, expected to occur 50% of the time, the expected return would be 5%.
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Solution Summary
This solution helps go through statistical concepts such as expected return, variance, and standard deviation using three examples.
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First we find the expected return, which is just the sum of (probability of each state X return from each state)
expected return = 0.3 X -0.05 + ...
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