Based on the following information, compute the expected return and standard deviationfor Stock A and Stock B.
Rate of Return if State Occurs
State of Economy Probabilityof State Stock A Stock B
Recession 0.2 0.04 -0.21
Normal 0.6 0.08 0.13
Boom 0.2 0.12 0.33.
Please refer attached file for better clarity of table and formulas.
P R P*R (R-Mean Return)^2 P*(R-Mean Return)^2
Recession 0.2 0.04 0.008 0.0016 0.00032
Normal 0.6 0.08 …
Solution describes the steps to calculate expected return and standard deviation of the returns in the given cases.