Given the following future distribution of returns: Scenario Probability 1 10% 2 3 50% 40% Market...

  

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Given the following future distribution of returns: Scenario Probability 1 10% 2 3 50% 40% Market Portfolio Stock YY -3% -10% 8% 18% 15% 25% 1) Calculate the expected return and standard deviation for the market portfolio and stock YY. (6 points) 2) Calculate the correlation between the returns of the market portfolio and stock YY. (3 points) 3) Calculate the beta of stock YY. (2 points) 4) If the risk-free rate is 5%, i) what is the required return of stock YY? Is stock YY under-valued or over-valued? Explain briefly. (3 points) ii) calculate the expected return and standard deviation of a portfolio that is composed of 50% market portfolio, 30% stock YY and 20% risk-free asset. (6 points) Given the following future distribution of returns: Scenario Probability 1 10% 2 3 50% 40% Market Portfolio Stock YY -3% -10% 8% 18% 15% 25% 1) Calculate the expected return and standard deviation for the market portfolio and stock YY. (6 points) 2) Calculate the correlation between the returns of the market portfolio and stock YY. (3 points) 3) Calculate the beta of stock YY. (2 points) 4) If the risk-free rate is 5%, i) what is the required return of stock YY? Is stock YY under-valued or over-valued? Explain briefly. (3 points) ii) calculate the expected return and standard deviation of a portfolio that is composed of 50% market portfolio, 30% stock YY and 20% risk-free asset. (6 points)