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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