Problem:
Kali's Ski Resort, Inc. stock is quite cyclical. In a boom economy, the stock is expected to return 30% in comparison to 12% in a normal economy and a negative 20% in a recessionary period. The probability of a recession is 15%. There is a 30% chance of a boom economy. The remainder of the time, the economy will be at normal levels.
Task:
What is the standard deviation of the returns on Kali's Ski Resort, Inc. stock? Explain in detail and please provide all calculation.
1. 10.05%
2. 12.60%
3. 15.83%
4. 17.46%
5. 25.04%