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Calculating expected return and standard deviation

Based on the following information, compute the expected return and standard deviation for Stock A and Stock B.

Rate of Return if State Occurs
State of Economy Probability of State Stock A Stock B
of Economy

Recession 0.2 0.04 -0.21
Normal 0.6 0.08 0.13
Boom 0.2 0.12 0.33.

Solution Preview

Please refer attached file for better clarity of table and formulas.

Stock A
Probability Returns
P R P*R (R-Mean Return)^2 P*(R-Mean Return)^2
Recession 0.2 0.04 0.008 0.0016 0.00032
Normal 0.6 0.08 ...

Solution Summary

Solution describes the steps to calculate expected return and standard deviation of the returns in the given cases.

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