Problem 11-7 Calculating Returns and Standard Deviations [LO 1]

Consider the following information:

	Probability of State			Rate of Return if State Occurs
Economy	of Economy			Stock A				Stock B
Recession		.20				.035			.40
Normal		.60				.115			.30
Boom		.20				.290			.53

a. Calculate the expected return for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	Expected return
E(RA)		%
E(RB)		%

b. Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	Standard deviation
A		%
B		%