Probability of the state of economy Rate of return if state occurs Stokk SSS Recession 0.4 4%
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Question:
Probability of the state of economy | Rate of return if state occurs Stokk SSS | |
Recession | 0.4 | 4% |
Boom | 0.6 | 18% |
Consider following information.
a) Calculate the expected return of a stock.
b) Calculate the standard deviation of a stock return.
c) If the risk-free rate is 2% what is the expected portfolio return invested 75% in stock SSS and 25% in risk-free asset?
d) Discuss what do we mean by systematic and unsystematic risk. What is the effect of diversification?
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
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