Consider the following information: Rate of return State of Economy Probability Stock A Stock B Recession...

  

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Consider the following information: Rate of return State of Economy Probability Stock A Stock B Recession 0.30 -40% 6% Normal Boom 0.50 18% 4% 0.20 142% 2% [Note: take full decimal places in the middle steps and round your FINAL answer to 2 decimal places (i.e. $1.23 or 1.23%)] (a) Calculate the expected return for the two Stocks A and B respectively. (in %) (4 marks) (b) Calculate the standard deviation for the two Stocks A and B respectively. (in %) (4 marks) (c) If you have $2 million to invest in a stock portfolio and your goal is to create a portfolio with an expected return of 16.92%, how much money will you invest in Stock A and Stock B respectively? (4 marks) (d) Based on your answer in part (c), calculate the standard deviation for the portfolio. (in %) (2 marks) (e) If enough stocks (i.e. 100 randomly selected stocks) had been included in the portfolio, what happen to the standard deviation for the portfolio? Explain. [within 100 words] (4 marks) Consider the following information: Rate of return State of Economy Probability Stock A Stock B Recession 0.30 -40% 6% Normal Boom 0.50 18% 4% 0.20 142% 2% [Note: take full decimal places in the middle steps and round your FINAL answer to 2 decimal places (i.e. $1.23 or 1.23%)] (a) Calculate the expected return for the two Stocks A and B respectively. (in %) (4 marks) (b) Calculate the standard deviation for the two Stocks A and B respectively. (in %) (4 marks) (c) If you have $2 million to invest in a stock portfolio and your goal is to create a portfolio with an expected return of 16.92%, how much money will you invest in Stock A and Stock B respectively? (4 marks) (d) Based on your answer in part (c), calculate the standard deviation for the portfolio. (in %) (2 marks) (e) If enough stocks (i.e. 100 randomly selected stocks) had been included in the portfolio, what happen to the standard deviation for the portfolio? Explain. [within 100 words] (4 marks)