According to the latest forecasts for next year, there is a 30% chance that the economy...

 

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According to the latest forecasts for next year, there is a 30% chance that the economy will enter a recession, a 40% chance that the GDP will grow by 1%, and a 30% chance that GDP will grow by 4%. If the economy enters a recession the stock market return will be -10%. If GDP grows by 1%, the stock market return will be 5%. If GDP grows by 4%, the stock market return will be 20%. What is the standard deviation of the stock market? According to the latest forecasts for next year, there is a 30% chance that the economy will enter a recession, a 40% chance that the GDP will grow by 1%, and a 30% chance that GDP will grow by 4%. If the economy enters a recession the stock market return will be -10%. If GDP grows by 1%, the stock market return will be 5%. If GDP grows by 4%, the stock market return will be 20%. What is the standard deviation of the stock market?

Answer rating: 100% (QA)

SOLUTION The standard deviation of the stock market return can be calc... View the full answer