Question: Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(r A,s ) E(r

Intro

We know the following expected returns for stocks A and B, given different states of the economy:

State (s) Probability E(rA,s) E(rB,s)
Recession 0.2 -0.03 0.02
Normal 0.5 0.12 0.05
Expansion 0.3 0.2 0.09

The expected return on the market portfolio is 0.09 and the risk-free rate is 0.02.

Attempt 3/10 for 8 pts.

Part 1

What is the standard deviation of returns for stock A?

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