The Probability the Economy Will Boom Is 10 Percent While

Multiple Choice

The probability the economy will boom is 10 percent while the probability of a recession is 20 percent.Stock A is expected to return 15 percent in a boom,9 percent in a normal economy,and lose 14 percent in a recession.Stock B should return 10 percent in a boom,6 percent in a normal economy,and 2 percent in a recession.Stock C is expected to return 5 percent in a boom,7 percent in a normal economy,and 8 percent in a recession.What is the standard deviation of a portfolio invested 20 percent in Stock A,30 percent in Stock B,and 50 percent in Stock C?

A) .6 percent
B) .9 percent
C) 1.8 percent
D) 2.2 percent
E) 4.9 percent