# Calculating expected return and standard deviation

The annual returns, in percentages, on stocks A and B for three possible states of the economy are given in the table below.

Economy State Probability Stock A Stock B

Good 0.5 40 20

Average 0.3 20 40

Bad 0.2 10 8

1. If one invested in Stock A, what would be the expected annual percentage return?

2. If one invested in Stock A, what would be the standard deviation of the percentage return?

© BrainMass Inc. brainmass.com June 4, 2020, 1:35 am ad1c9bdddfhttps://brainmass.com/statistics/standard-deviation/calculating-expected-return-and-standard-deviation-408703

#### Solution Preview

Please refer attached file for complete solution. Expressions typed with the help of equation writer are missing here.

Probability Returns

...

#### Solution Summary

Solution depicts the steps to calculate expected return and standard deviation of returns in the given case.

$2.19