You have a portfolio that is comprised of 40% of Stock A and 60% of Stock B. What is the variance of the portfolio? State of the Economy Probability E(R A ) E(R B ) 40 % 60 % Normal .7 12 % 14 % Recession .3 7 % 10 % Calculate fully diluted shares using the information below ($

You have a portfolio that is comprised of 40% of Stock A and 60% of Stock B. What is the variance of the portfolio?

State of the Economy	Probability	E(RA)		E(RB)
		40	%	60	%
Normal	.7	12	%	14	%
Recession	.3	−7	%	−10	%

Transcribed Image Text:

Calculate fully diluted shares using the information below ($ in millions, except per share data; shares in millions) Assumptions Current share price $25 Basic shares outstanding 210 Exercisable options 20 Weighted average exercise price $40 The firm will use the option proceeds to repurchase the stock Note: input your answer in millions

Expert Answer

We must first determine the portfolio's expected return before we can determine the variance of the View the full answer