The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 25 percent while the probability of a boom is 10 percent. What is the standard deviation of the returns on this stock?
19.94 percent
E(r) = (0.10 0.32) + (0.65 0.14) + (0.25 -0.28) = 0.053
Var = 0.10 (0.32 - 0.053)2 + 0.65 (0.14 - 0.053)2 + 0.25 (-0.28 - 0.053)2 = 0.039771
Std dev = 0.039771 = 19.94 percent

A community's resource allocation is ultimately determined by a collection of interrelated processes for production and consumption collectively referred to as an economy. The creation and use of services and products in its entirety satisfy the needs of those who reside there and conduct business there.

Which are some instances of economy?

The traditional economy, which uses a country's traditions and history to direct the production and sale of goods, is a well-known illustration of an economy. The main pillars of market societies are agriculture, fisheries, & hunting.

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The complete question is-

The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 25 percent while the probability of a boom is 10 percent. What is the standard deviation of the returns on this stock?

A. 19.94 percent

B. 21.56 percent

C. 25.83 percent

D. 32.08 percent

E. 39.77 percent