The following table shows the expected returns from six different stocks in three different states of the
Question:
The following table shows the expected returns from six different stocks in three different states of the economy:
State of Economy | Probability | Return Stock A | Return Stock B | Return Stock C | Return Stock D | Return Stock E | Return Stock F |
---|---|---|---|---|---|---|---|
Growth | 1/3 | 30% | 3% | 15% | 24% | 0% | 18% |
Status Quo | 1/3 | 22% | 1% | 3% | 6% | 3% | 3% |
Recession | 1/3 | 20% | 4% | -3% | -6% | 6% | -3% |
A) Calculate the expected return for each stock.
B) Calculate the standard deviation for each stock.
c)Consider of a portfolio consisting of 50% in Stock A and 50% in Stock B. Calculate the covariance between Stocks A and B. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.
d)Consider of a portfolio consisting of 50% in Stock C and 50% in Stock D. Calculate the covariance between Stocks C and D. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.
E)Consider of a portfolio consisting of 50% in Stock E and 50% in Stock F. Calculate the covariance between Stocks E and F. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.
Intermediate Algebra
ISBN: 9780134895987
13th Edition
Authors: Margaret Lial, John Hornsby, Terry McGinnis