What Is the Standard Deviation of the Returns on a Share

question 42

Multiple Choice

What is the standard deviation of the returns on a share given the following information? $\begin{array} { | l | l | l | } \hline \text { State of Economy } & \text { Probability of State of Economy } & \text { Rate of Return if State Occurs } \\\hline \text { Boom } & 10 \% & 16 \% \\\hline \text { Normal } & 60 \% & 11 \% \\\hline \text { Recession } & 30 \% & - 8 \%\end{array}$

• A)5.80%
• B)7.34%
• C)8.38%
• D)9.15%
• E)9.87%

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Definitions:

Total Dollars

Refers to the aggregate amount of currency in various forms within a particular economic context.

Import Tariffs

Taxes imposed by a government on goods imported from other countries to protect domestic industries or to generate revenue.

Quotas

Quotas are limits set by a government on the amount of a particular commodity that can be imported or produced domestically in a certain period, used as a means to regulate trade and support local industries.

Comparative Advantage

The ability of an entity (could be a person, company, or country) to produce a good or service at a lower opportunity cost than another.