Assume the Probability of a Pessimistic, Most Likely and Optimistic

Multiple Choice

Assume the probability of a pessimistic, most likely and optimistic state of nature is .25, .45 and .30, and the returns associated with those states of nature are 10%, 12%, and 16% for asset X. Based on this information, the expected return and standard deviation of return are:

A) 12.0% and 4.0%
B) 12.7% and 2.3%
C) 12.7% and 4.0%
D) 12.0% and 2.3%