P13-7 Calculating Returns and Standard Deviations [LO1]

Consider the following information:

		Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B
Recession	0.20	0.04	-0.17
Normal	0.50	0.07	0.13
Boom	0.30	0.15	0.34

Required:

(a)	Calculate the expected return for Stock A. (Do not round your intermediate calculations.)
	8.80% 8.62% 9.15% 9.24% 8.69%

(b)	Calculate the expected return for Stock B. (Do not round your intermediate calculations.)
	13.83% 13.30% 10.00% 12.64% 13.96%

(c)	Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.)
	4.21% 4.42% 4.00% 2.98% 4.38%

(d)	Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)
	17.67% 16.79% 12.49% 18.38% 18.55%