What Is the Standard Deviation of the Returns on a Stock

question 95

Multiple Choice

What is the standard deviation of the returns on a stock given the following information? $$\begin{array} { l c c } { \text { State of } } & \text { Probability of } & \text { Rate of Return } \\\text { Econony } & \text { State of Economy } & \text { if State Occurs } \\\text { Boom } & .28 & .175 \\\text { Normal } & .67 & .128 \\\text { Recession } & .05 & .026\end{array}$$

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Definitions:

Heuristic

A mental shortcut or rule of thumb that allows people to solve problems and make judgments quickly and efficiently.

Algorithm

A step-by-step procedure or formula for solving a problem or accomplishing a specific task.

Chess Master

An expert or highly skilled player of chess, often having achieved a high ranking or title through competition.

Chess-playing Computer

A computer system specifically designed to play the game of chess against human opponents or other computers, often utilizing advanced algorithms and artificial intelligence.