Question: (a) Compute the standard deviation of the expected return given the economic states, their likelihoods, and the potential returns. Economic State Probability Return Fast Growth

(a) Compute the standard deviation of the expected return given the economic states, their likelihoods, and the potential returns. Economic State Probability Return Fast Growth 03 25% Slow Growth 0.5 6% Recession 6x -59% Depression 2x -17% (8 marks) (6) You are convinced your company which has a beta of 13 will earn a retum of 15% the coming year. It is observed that the expected rate of return on the market is 13% and the rate on T-Bills is 5%. Based on your firm's level of risk determine the return it should earned and based on your position state, giving reasons if the firm over or under valued marks)

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