Calculate the standard deviation in the anticipated return

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Reference no: EM13805603

James is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securities at what hopes will be bargian prices. The fund sponsor suggested to james that the fund's performance will hinge on how the national economy performs in the coming year. Specifically, he suggested the following possible outcomes.

State of Economy Probability Fund Returns

Rapid expansion and recovery 10% 100%

Modest growth 50% 30%

Continued recession 30% 10%

Falls into depression 10% -100%

a. Based on these potential outcomes, what is your estimate of the expected rate of return from this investment? (Round two decimal places)

b. Calculate the standard deviation in the anticipated return found in part a. (Round two decimal places)

Reference no: EM13805603

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