a. Use the following information on states of the economy and stock returns to calculate the expected return for Dingaling Telephone.
State of Economy Probability of State of the Economy Security Return if State Occurs
Recession .30 -8%
Normal .40 13
Boom .30 23
b. Using the information in the previous question, calculate the standard deviation of returns.
c. Repeat Questions 1 & 2 assuming that all three states are equally likely.