# Solve: For the Expected Return

Please see the attached word document to view the expected return problems.

Any assistance would be appreciated.

Consider the following information:

Rate of Return If State Occurs

State of Probability of ________________________________________

Economy State of Economy Stock A Stock B

Recession 0.17 0.05 − 0.21

Normal 0.62 0.09 0.08

Boom 0.21 0.16 0.25

________________________________________

Calculate the expected return for the two stocks. (Round your answers to 2 decimal places. (e.g., 32.16))

Expected return

Stock A %

Stock B %

________________________________________

Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Standard deviation

Stock A %

Stock B %

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#### Solution Preview

Expected return of A = 0.17 X 0.05 + 0.62 X 0.09 + 0.21 X 0.16 = 0.0979

Expected return of B = 0.17 X -0.21 + 0.62 X 0.08 + ...

#### Solution Summary

The expected return and standard deviations for the two stocks are given.