b. There are two assets and three states of the economy: Probability of State of Economy...

  

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b. There are two assets and three states of the economy: Probability of State of Economy State of Economy Recession Normal Boom 0.25 0.40 0.35 Rate of Return Stock A -0.18 0.25 0.5 1. What are the expected returns and standard deviations for these two stocks? II. Suppose you have $60,000 total. If you put $20,000 in Stock A and the remainder in Stock B, what will be the expected return and standard deviation of your portfolio? Stock B 0.25 0.35 0.40 c. You own a portfolio equally invested in a riskfree asset and two stocks. If one of the stocks has a beta of 1.50 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? b. There are two assets and three states of the economy: Probability of State of Economy State of Economy Recession Normal Boom 0.25 0.40 0.35 Rate of Return Stock A -0.18 0.25 0.5 1. What are the expected returns and standard deviations for these two stocks? II. Suppose you have $60,000 total. If you put $20,000 in Stock A and the remainder in Stock B, what will be the expected return and standard deviation of your portfolio? Stock B 0.25 0.35 0.40 c. You own a portfolio equally invested in a riskfree asset and two stocks. If one of the stocks has a beta of 1.50 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?

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This question pertains to portfolio theory and calculating expected returns and standard deviations for financial assets based on different states of the economy Lets break it down step by step b I Ex... View the full answer