You own three stocks and have estimated the following joint probability distribution of returns: Market Condition Probability
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Question:
You own three stocks and have estimated the following joint probability distribution of returns:
Market Condition | Probability of Occurence | Return on Stock A | Return on Stock B | Return on Stock C | Return on Stock D |
Growth | 35% | 10 | 80 | 90 | 30 |
Normal | 40% | 40 | 20 | 10 | 30 |
Recession | 25% | 80 | -10 | -30 | 30 |
a-)Calculate the portfolio’s expected return and standard deviation if you invest 35% in Stock A, 35% in Stock B, 30% in Stock C.
b-)Calculate the portfolio’s expected return and standard deviation if you invest 25% in Stock A, 25% in Stock B, 25% in Stock C, 25% in Stock D,.
Related Book For
Fundamentals of Investments
ISBN: 978-0132926171
3rd edition
Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey
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