You are a portfolio manager. John Smith, one of your clients, by providing you the following...

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You are a portfolio manager. John Smith, one of your clients, by providing you the following formation requested you to calculate standard deviation of Shah Corporation stock and High Fly Corporation. Shah Corporation Stock State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 5% 31% Good 21% Poor -8% Bust -10% 25% 50% 20% High Fly Corporation Stock State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 5% 25% Good 25% 18% Poor 50% -5% Bust 20% -11% Based on the given information, what is the standard deviation of the returns on i) Shah Corporation and ii) High Fly Corporation? Which stock has higher standard deviation? Why? Please provide your reasoning. Please show all the calculations by which you came up with the final answer. You are a portfolio manager. John Smith, one of your clients, by providing you the following formation requested you to calculate standard deviation of Shah Corporation stock and High Fly Corporation. Shah Corporation Stock State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 5% 31% Good 21% Poor -8% Bust -10% 25% 50% 20% High Fly Corporation Stock State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 5% 25% Good 25% 18% Poor 50% -5% Bust 20% -11% Based on the given information, what is the standard deviation of the returns on i) Shah Corporation and ii) High Fly Corporation? Which stock has higher standard deviation? Why? Please provide your reasoning. Please show all the calculations by which you came up with the final answer.

Answer rating: 100% (QA)

To calculate the standard deviation of returns on each stock we first need to calculate the expecte... View the full answer