Question: Scenario Probability Stock A forecast return Stock B forecast return 1 0.3 0.1 -0.2 2 0.4 0.2 0.1 3 0.3 0.3 0.1 (i) Compute /
| Scenario | Probability | Stock A forecast return | Stock B forecast return |
| 1 | 0.3 | 0.1 | -0.2 |
| 2 | 0.4 | 0.2 | 0.1 |
| 3 | 0.3 | 0.3 | 0.1 |
(i) Compute/calculate expected return and risk (i.e., variance/standard deviation) of Stock A and Stock B.
(ii) Compute/calculate expected return and risk (i.e., variance/standard deviation) for a portfolio with 60% in Stock A and 40% in Stock B (40%). The returns in the below tables are forecast returns.
Compute/calculate the historical average return and standard deviation for a portfolio with 50% in X and 50% in Y.
| Year | Stock X Return | Stock Y Return |
| 2019 | 0.10 | -0.05 |
| 2020 | -0.05 | -0.10 |
| 2021 | 0.12 | 0.06 |
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