# Expected return and standard deviation

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%

© BrainMass Inc. brainmass.com October 1, 2020, 11:16 pm ad1c9bdddfhttps://brainmass.com/economics/finance/expected-return-standard-deviation-stock-264867

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a. The expected return is correct

b. In standard deviation, the third ...

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

$2.19