Compute the standard deviation of the return

Reference no: EM13190435

Assume that the economy can experience high growth, normal growth, or recession. You expect the following stock market returns for the coming year under these conditions.

State Probability Return
High Growth 0.2 +30%
Normal Growth 0.7 +12%
Recession 0.1 -15%

a. Compute the expected value of a $1000 investment both in dollars aand as a percentage over the coming year.
b. Compute the standard deviation of the return over the coming year.
c. If the risk free return is 7%, what is the risk premium for a stock market investment?

Reference no: EM13190435

Questions Cloud

Compute the concentration of cadium chloride contaminant : Calculate the concentration of cadium chloride contaminant in the original groundwater sample. Round your answer to 2 important digits.

How foreign exchange market affect the quantity of imports : How would a substantial appreciation in the European euro in the foreign exchange market affect the quantity of imports of European products by the U.S. How would such an appreciation of the European euro affect travel by Americans to Europe

Define temprature of the ideal gas after equilibration is v : Consider n moles of ideal gas kept in a heat isolated cylinder (all processes are adiabatic) with a piston at extrnal pressure P(i), and at the temperature T(i). the extrnal pressure is suddenly changed to P=2P(i), and we wait for the system to eq..

Create a report exploring the stages : Create a report exploring the stages involved in a specific attack (of your choice) against a computing system.

Compute the standard deviation of the return : Assume that the economy can experience high growth, normal growth, or recession. You expect the following stock market returns for the coming year under these conditions. State Probability Return High Growth 0.2 +30%

How to obtain pure naphthoic acid from the mixture : Using active extraction (changing the polarity) and a gravity filtration to remove a component, describe how you would obtain pure naphthoic acid from this mixture.

Mechanism for bromobenzene and magnesium turnings : Mechanism for bromobenzene + magnesium turnings + annhydrous diethyl ether + benzaldehyde + H2SO4

Why are patents important to those who hold them : To maximize profits, a perfectly competitive firm should produce until: price is greater than average total cost.marginal cost is equal to price. average total cost is minimized. per unit profits are maximized.

State automobile clocked by law-enforcement radar : Consider a 2710-lb automobile clocked by law-enforcement radar at a speed of 85.5 mph (miles/hour). If the position of the car is known to within 5.0 feet at the time of the measurement, what is the uncertainty in the velocity of the car? in mph

User Account

All Pages