1. Calculate the expected return, variance, covariance and correlation coefficient of the following two stocks. State...

 

Transcribed Image Text:

1. Calculate the expected return, variance, covariance and correlation coefficient of the following two stocks. State of the world Good Bad Very Bad Probability 0.6 0.2 Return on stock A 12% 4% -1% Return on stock B 6% 8% 4% 2. What would be the variance and standard deviation of a portfolio consisting of only stocks A and B (as described in question 1), when the expected return of the portfolio is 7%? 1. Calculate the expected return, variance, covariance and correlation coefficient of the following two stocks. State of the world Good Bad Very Bad Probability 0.6 0.2 Return on stock A 12% 4% -1% Return on stock B 6% 8% 4% 2. What would be the variance and standard deviation of a portfolio consisting of only stocks A and B (as described in question 1), when the expected return of the portfolio is 7%?