Question: Consider the following two stocks. Probabilities ( pi pi ) Stock a Stock b Recession p1= p1= 29% -4% 3% Normal p2= p2= 32% 6%

Consider the following two stocks.

	Probabilities (pipi )	Stock "a"	Stock "b"
Recession	p1=p1= 29%	-4%	3%
Normal	p2=p2= 32%	6%	-12%
Boom	p3=p3= 39%	18%	24%

What is the expected return of each stock? Enter your answers as a percentage rounded to 2 decimal places. Do not enter the percentage sign in your answer.

ra= Correct response: 7.78

rb=

Correct response: 6.39

Using the correct answers from the previous question, what is the standard deviation of each stock? Enter your answer as a percentage rounded to 2 decimal places. Do not enter the percentage sign in your answer.

SDa=

SDb=

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