Question: We estimate that there will be two states if the economy, boom and bust, in the next period, with probability of 30% and 70%, respectively.

We estimate that there will be two states if the economy, boom and bust, in the next period, with probability of 30% and 70%, respectively. We also estimate that the return on stock A will be 50% in the boom state and -10% in the bust state. What is the standard deviation of the returns os stock A?

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