FIN 357 – The returns on the common stock of Maynard Cosmetic Specialties

Subject: Business    / Finance
Question
The returns on the common stock of Maynard Cosmetic Specialties are quite cyclical. In a boom economy, the stock is expected to return 22 percent in comparison to 9 percent in a normal economy and a negative 14 percent in a recessionary period. The probability of a recession is 35 percent while the probability of a boom is 10 percent. What is the standard deviation of the returns on this stock?
10.67 percent
12.51 percent
15.88 percent
19.94 percent
22.86 percent