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  3. a stock is expected to earn 15 percent in a boom e

A stock is expected to earn 15 percent in a boom economy and 7 percent...

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Accounting

A stock is expected to earn 15 percent in a boom economy and 7 percent in a normal economy. There is a 35 percent chance the economy will boom and a 65.0 percent chance the economy will be normal. What is the standard deviation of these returns?

3.82 Percent

4.85 Percent

4.97 Percent

5.63 Percent

3.

A portfolio consists of 24 percent Stock A, 54 percent Stock B, and 22 percent Stock C. What is the portfolio expected return given the following:

State of Economy

Probability of State of Economy

Stock A Returns

Stock B Returns

Stock C Returns

Normal

.75

16%

9%

26%

Recession

.25

2

19

24

10.55 percent

11.94 percent

8.24 percent

12.47 percent

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