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

question 4

Multiple Choice

You have been given this probability distribution for the holding-period return for Cheese, Inc. stock: $$\begin{array} { l c c } \text { Stock of the Economy } & \text { Probability } & \text { HPR } \\\text { Boom } & 0.20 & 24 \% \\\text { Normal growth } & 0.45 & 15 \% \\\text { Recession } & 0.35 & 8 \% \\\hline\end{array}$$ Assuming that the expected return on Cheese's stock is 14.35%, what is the standard deviation of these returns?

• A) 4.72%
• B) 6.30%
• C) 4.38%
• D) 5.74%
• E) None of the options are correct.

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Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, technology).

Absolute Advantage

The ability of an entity to produce a good or service more efficiently than its competitors, leading to greater output with the same resources.

Herring

A small, silver-colored fish commonly found in the temperate waters of the North Atlantic, a significant source of food globally.

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action or in the context of making a decision.