You Have Been Given This Probability Distribution for the Holding-Period

question 50

Multiple Choice

You have been given this probability distribution for the holding-period return for a stock: $\begin{array}{lcc} \text { Stock of the Economy } & \text { Probability} & \text {HPR } \\ \text { Boom } &0.40&22\%\\ \text { Normal growth } &0.35&11\%\\\text { Recession }&0.25&-9\%\end{array}$


What is the expected standard deviation for the stock?

• A) 2.07%
• B) 9.96%
• C) 7.04%
• D) 1.44%
• E) None of the options are correct.

---

Definitions:

Net Income

The total profit of a company after all expenses, including taxes and costs, have been deducted from total revenue.

Equity Method

The equity method is an accounting technique used to assess the investments in other companies, where the investment is recorded at original cost and adjusted according to the investor’s share of the investee's profit or loss.

Intra-entity Inventory

Transactions involving the exchange of goods between divisions within the same company, often for consolidation or reallocation purposes.

Gross Profit

The disparity between sales income and the expense of goods sold, prior to considering additional expenditures.