Question: Scenario Recession Normal Boom Suppose there are three possible return outcomes for Stock X and Stock Y: Stock X Stock Y -6% 8% 20%

Scenario Recession Normal Boom Suppose there are three possible return outcomes for

Scenario Recession Normal Boom Suppose there are three possible return outcomes for Stock X and Stock Y: Stock X Stock Y -6% 8% 20% 5% 2% -4% Big Al decides to invest 40% in Stock X and 60% in Stock Y. a. Calculate the expected return of each stock b. Calculate the standard deviation of each stock c. The correlation coefficient (p) of Stock X and Y is -.95 Calculate the covariance of Stock X with Stock Y d. Calculate the expected return on Big Al's portfolio e. Calculate the standard deviation of Big Al's portfolio Probability 0.2 0.6 0.2

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