The annual returns, in percentages, on stocks A and B for three possible states of the economy are given in the table below.
Economy State Probability Stock A Stock B
Good 0.5 40 20
Average 0.3 20 40
Bad 0.2 10 8
1. If one invested in Stock A, what would be the expected annual percentage return?
2. If one invested in Stock A, what would be the standard deviationof the percentage return?
Please refer attached file for complete solution. Expressions typed with the help of equation writer are missing here.
Solution depicts the steps to calculate expected return and standard deviation of returns in the given case.