A stock’s expected return has the following distribution:

Outcome	Probability	Return
Recession	25%	-30%
Expansion	40%	15%
Boom	35%	55%

1. What is the stock’s expected return?

2. What is the standard deviation of expected return?                                   

3. Interpret your result. How do you explain the relationship between the expected return and the standard deviation of expected return of this investment? [(Assume a normal probability distribution and the return is within + one standard deviation of the expected return)]

Use 2-decimal places in your calculation.         

Answer rating: 100% (QA)

Q1 Expected return 025 30 040 15 035 55 75 6 1925 1775 Q2 Standard deviation p... View the full answer