Question 11 Amelie considers investing in one stock and one bond. The following table lists the...

 

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Question 11 Amelie considers investing in one stock and one bond. The following table lists the returns on the two assets in three different scenarios and the probability of each scenario occurring. Scenario Probability Recession Normal Boom 50% 30% 20% Stock -5% 10% 20% Bond 6% 2% 0% Amelie decided to form an equally-weighted portfolio by investing 50% of her wealth in the stock and 50% of her wealth in the bond. a) What is the expected return of Amelie's portfolio? b) What is the standard deviation of the returns to Amelie's portfolio? Question 11 Amelie considers investing in one stock and one bond. The following table lists the returns on the two assets in three different scenarios and the probability of each scenario occurring. Scenario Probability Recession Normal Boom 50% 30% 20% Stock -5% 10% 20% Bond 6% 2% 0% Amelie decided to form an equally-weighted portfolio by investing 50% of her wealth in the stock and 50% of her wealth in the bond. a) What is the expected return of Amelie's portfolio? b) What is the standard deviation of the returns to Amelie's portfolio?