Question: The forecasted returns of two stocks in different economic conditions are as follows: Probability Retum on stock A (%) Return on stock B (%)

The forecasted returns of two stocks in different economic conditions are as

The forecasted returns of two stocks in different economic conditions are as follows: Probability Retum on stock A (%) Return on stock B (%) Super growth 0.30 30 20 Economic Condition Low growth 0.20 20 High growth 0.25 25 15 10 Stagnation Recession 0.15 0.1 10 5 -25 -10 Calculate the following: A. What is the expected return and risk if you invest only in stock A? B. What is the expected return and risk if you invest only in stock B? C. What is the expected return and risk if you invest in a portfolio consisting of stock A and B in equal proportion? [1 mark] [1 mark]

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A The expected return for stock A is 22 5 and the risk is 5 Ex pected return Pro b ability x Return ... View full answer

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