A B C D E F G H K My Work Expected Return Amazon (20%*-10*)+(60%*20%)+(20%*30%) Standard Deviation Amazon Deviation - Ex Dev. Squared Sq. Dev. * Prob Recession -26.00% % 0.0676 0.01352 Normal 4.00% 0.0016 0.00096 Boom 14.00% 0.0196 0.00392 0.0184 0.1356466 1 Demonstration of beta: 2 3 Stock Mkt Amazon 4 Economy Probability Return Return 5 Recession 20% -5% -10% 6 Normal 60% 15% 20% 7 Boom 20% 30% 8 9 10 The expected return on Amazon stock is: 11 12 The standard deviation risk of Amazon stock is: 13 The standard deviation risk of the stock market (Question 2) was: 14 15 Amazon's stock's Beta is: 16 17 Explain in words how Amazon compares to the market (risk and return). 18 25% 16.0% 13.6% 11.9% 19 20 4 21