Compute the Standard Deviation of the Expected Return Given These

question 77

Multiple Choice

Compute the standard deviation of the expected return given these three economic states, their likelihoods, and the potential returns:
$$\begin{array}{l}\begin{array} { c c r } \text { Eccrorric State }&\text { Probability } & \text { Return } \\\text { fast growth }&0.1 & 50 \% \\\text {slow growth }&0.6 & 8\% \\\text { recession }&0.3 & - 10\%\end{array}\end{array}$$

• A) 6.8 percent
• B) 16.5 percent
• C) 21.5 percent
• D) 46.4 percent

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Definitions:

Positive Externality

A benefit gained by a third party not directly involved in a transaction or activity, where the social or economic gain is not reflected in the market price.

Social Planner

A theoretical decision-maker in economics who aims to achieve optimal outcomes for society by considering the allocation of resources and distribution of goods and services.

Subsidy

A payment made by the government to a firm, industry, or individual, usually to encourage the production of a certain good or service or to reduce its price for consumers.

Output

The quantity of goods or services produced in a given time period, by a firm, industry, or country.