Question 2: Consider a security with the stock prices ( 80 with probability 90 with probability S(1) = { 100 with probability 110 with probability (a) What is the current price of the stock for which the expected return would be 12%? (b) What is the current price of the stock for which the standard deviation would be 18% Formulae M = E(S(1))+D-S(0) 50 , and where D=0= = E(S(1))-S(0) Var(K) = 0% = (so)Var(S(1) Sharp Ratio"; " CML: y = ["0" Xo] +r; Covariance:Cov(X,Y) = OXY = E[(X-E(X)(Y-E(Y))] = E(XY)-E(X)E(Y)] N - 1 N-1 Portfolio mean: Hp = wifi + 2H2, where wi+w2 = 1 Portfolio variance: 02 = wo + wzo3 + 2p1,2WW20102 Correlation coefficient: oxy = Cov(X,Y)