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    Expected return and standard deviation

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    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%

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    https://brainmass.com/economics/finance/expected-return-standard-deviation-stock-264867

    Solution Preview

    a. The expected return is correct

    b. In standard deviation, the third ...

    Solution Summary

    The solution explains how to calculate the expected return and the standard deviation of returns

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