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

question 42

Multiple Choice

You have been given this probability distribution for the holding-period return for KMP stock: $$\begin{array} { l c r } \text { Stock of the Economy } & \text { Probability } & \text { HPR } \\\text { Boom } & 0.30 & 18 \% \\\text { Normal growth } & 0.50 & 12 \% \\\text { Recession } & 0.20 & - 5 \% \\\hline\end{array}$$ What is the expected standard deviation for KMP stock?

• A) 6.91%
• B) 8.13%
• C) 7.79%
• D) 7.25%
• E) 8.85%

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Definitions:

Keynes

Relates to John Maynard Keynes, a UK-based economist whose notions significantly altered macroeconomics theory and the financial policies of governments.

Aggregate Supply

The aggregate amount of products and services that companies within an economy intend to offer for sale over a given period.

Aggregate Demand

The total demand for all goods and services within a particular market or economy at a given overall price level and time.

Classical School

A branch of economic thought that emphasizes the importance of market forces in determining economic outcomes and the self-regulating nature of the economy.