Variance and standard deviation (expected). Hull Consultants, a famous think tank in the Midwest, has...
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Variance and standard deviation (expected). Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability of a boom economy is 11%, the probability of a stable growth economy is 17%, the probability of a stagnant economy is 53%, and the probability of a recession is 19%. Calculate the variance and the standard deviation of the three investments. stock, corporate bond, and government bond. If the estimates for both the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose considering both risk and return? Stable Stock Corporate bond Government bond Boom 29% 10% golo 14% 70/ 6% 4% 6% 5% 12% 3% 2%
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