Question: State of the world Probability Security Returns X Security Returns Market Boom .30 .15 .20 Normal .40 .10 .07 Recession .30 .05 .03 E(R x

State of the world	Probability	Security Returns X	Security Returns Market


Boom	.30	.15	.20
Normal	.40	.10	.07
Recession	.30	.05	.03
		E(R_x) .10	E(R_Mkt) .097
		= .0015	= ?

Is this distribution symmetrical? Calculate the covariance. Calculate the variance of the portfolio made up of 30% X and 70% of the Market. Find the Beta for the firm. Find the correlation coefficient. What does beta measure?

	Var	0.0015	0.004821
	Weight	0.3	0.7

Cov	0.00255

s²	0.00356829

b (Beta)	0.528935905

r (rho)	0.948256842

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