Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(TA,s) E('B,s) Recession 0.3 -0.05 0.02 Normal 0.5 0.1 0.05 0.2 0.18 0.09 Expansion Part 1 What is the expected return for stock A? 7.1% Correct The expected return is the weighted average return across all states of the economy: E(RA) = (PsE(RA,s)) = 0.3 * (-0.05) + 0.5 * 0.1 +0.2 * 0.18 = 0.071 Part 2 What is the standard deviation of returns for stock A? 4+ decimals Submit BAttempt 1/5 for 5 pts. Attempt 5/5 for 4.6 pts