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 Hv = E(S(1) +D-S(0), and where D=0=4 = E($ 1700 Var(K) = 0% = (slojz Var(S(1)) Sharp Ratio=," CML= [","1 x 0] +rs 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 = wiji + W2M2, where wi+w2 = 1 Portfolio variance: 0 = w;o+wao3 + 221,2W1 W20102 Correlation coefficient: Pxy = 9 ent. - Cov(X,Y)