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State of the Economy Probability of the States Percentage Returns Economic recession 25% 5% Moderate economic growth 50% 10% Strong economic growth 25% 13% The standard deviation from investing in the asset is:

Sagot :

Answer:

The standard deviation from investing in the asset is 14.40%.

Explanation:

Note: The data in the question are first sorted before answering the question as follows:

State of the Economy       Probability of the States    Percentage Returns

Economic recession                        25%                                    5%

Moderate economic growth           50%                                    10%

Strong economic growth                25%                                    13%

The standard deviation from investing in the asset is:

The explanation of the answer is now given as follows:

Note: See the attached excel file for the calculation of Variance from investing in the asset.

From the attached excel file, we have:

Variance = 2.07%

Therefore, we have:

Standard deviation = Variance^0.5 = 2.07%^0.5 = 14.40%

Therefore, the standard deviation from investing in the asset is 14.40%.

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