Author Question: Use the following table: States of the Economy Probability of the State 3-Month T-Bill Large-Company ... (Read 93 times)

amal · **on:** Jul 10, 2018

Use the following table: States of the Economy Probability of the State 3-Month T-Bill Large-Company Stock Small-Company Stock Boom 0.3 4 10 30 Steady 0.5 4 5 20 Recession 0.2 4 0 10

What is the difference between the variances for large- and small-company stocks?
A) 40.25
B) 36.75
C) 27.30
D) 14.90

Question 2

Use the following table:

States of the Economy Probability of the State 3-Month
T-Bill Large-Company Stock Small-Company Stock
Boom 0.3 4 10 30
Steady 0.5 4 5 20
Recession 0.2 4 0 10

What is the difference between the standard deviation of a small-company stock and a 3-month T-bill?
A) 7.0
B) 5.5
C) 4.0
D) 3.5

trog · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: B
Explanation: B)
3-Month
T-Bill Large-Company Stock Small-Company Stock
Er= 4 5.5 21
VAR= 0 12.25 49
STDEV= 0 3.5 7

So 49 - 12.25 = 36.75.

Answer to Question 2

Answer: A
Explanation: A) 7 - 0 = 7.