Question: Question 2: Consider the following probability distribution for stocks A and B: The expected rates of return of stocks A and B are _____ and

Question 2: Consider the following probability distribution for stocks A and B:

Question 2: Consider the following probability distribution for stocks A and B:

  1. The expected rates of return of stocks A and B are _____ and _____, respectively. (2 Marks)
  2. The standard deviations of stocks A and B are _____ and _____, respectively. (2 Marks)
  3. What is the coefficient of correlation between A and B ? (2 Marks)
  4. If you invest 35% of your money in A and 65% in B, what would be your portfolio's expected rate of return and standard deviation? (4 Marks)

State Probability Return on Stock A Return on Stock B 1 0.15 8. 8 2 0.20 13 79 3 0.15 12 6% 4 0.30 14 9 5 0.20 16% 11%

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