Tuesday's class

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Question 23 Page 514 40% 20% 44 State of Eco Probability o Stock A Stock B Stock C Boom 0.2 0.24 0.36 0.55 Normal 0.55 0.17 0.13 0.09 Bust 0.25 0 0.048 0.072 0.0935 0.0715 0 -0.07 0.1415 0.0735 0.07 Profolio return 0.014 0.04312 0.0759 0.041745 -0.0505 -0.012625 We need to find the variance now 0.0001445069 0.0005909906 0.0021911761 0.00292667 square root −. 28 −. 45
Stock A Stock B Stock C Boom 10% 26% 12% 11% Normal 70% 14% 9% 8% Recession 20% -40% 5% 2% 0.0046656 0.00012250 0.0064512 0.00001750 0.0394272 0.00024500 VARIANCE 0.0505440 0.00038500 ST DEV SQUARE ROOT 22.48 1.96 2.7 2 Return if State Occurs State of Economy Probability of State of Economy Return if State Occurs
Stock A Stock B Boom 10% 26% 12% Normal 70% 14% 9% Recession 20% -40% 5% 10% 35% 12.8500% 8.9500% -1.1500% EXPECTED RETURN 7.3200% VARIANCE 0.000305809 0.000185983 0.001434818 0.00192661 STD DEVIATION SQUARE ROOT 0.043893166 4.389 State of Economy Probability of State of Economy
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