Use the following information to answer questions below.

a. Calculate the expected returns for A and B.

b. Calculate the standard deviations for A and B.

c. Calculate the covariance of the two companies.

d. What is the expected return on a portfolio with weights of 40% in asset A and 60% in asset B?

e. What is the standard deviation of a portfolio with weights of 40% in security A and the remainder in security B?

f. What is the correlation coefficient of the two securities?

Transcribed Image Text:

State Boom Normal Bust Probability 25 .65 .10 Return on A 15% 10% 4% Return on B -3% 4% 9% State Boom Normal Bust Probability 25 .65 .10 Return on A 15% 10% 4% Return on B -3% 4% 9%

Answer rating: 100% (QA)

a Expected return for A 2515 6510 1004 1065 1065 E... View the full answer