You are a portfolio manager. John Smith, one of your clients, by providing you the...
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Finance
You are a portfolio manager. John Smith, one of your clients, by providing you the following formation requested you to calculate standard deviation of Shah Corporation stock and High Fly Corporation.
Shah Corporation Stock
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Boom
5%
31%
Good
25%
21%
Poor
50%
-8%
Bust
20%
-10%
High Fly Corporation Stock
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Boom
5%
25%
Good
25%
18%
Poor
50%
-5%
Bust
20%
-11%
Based on the given information, what is the standard deviation of the returns on i) Shah Corporation and ii) High Fly Corporation? Which stock has higher standard deviation? Why? Please provide your reasoning. Please show all the calculations by which you came up with the final answer. (8 Points)
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