Calculate the expected return and standard deviation (square root of the variance) of the following probability distribution of returns:
Possible State of Economy Probability of State Return in State
Depression = State 1 0.10 = 10% -0.25 = -25%
Recession = State 2 0.20 = 20% -0.05 = -5%
Moderate Growth = State 3 0.45 = 45% 0.10 = 10%
Fast Expansion = State 4 0.25 = 25% 0.3 = 30%