a) Sam owns shares of stock S and stock T in her portfolio. The total value of her
stock S shares is £3,000. The total value of her stock T shares is £7,000. The table
below shows the different states of the economy, the probabilities, and the returns for
each stock, for the upcoming year.

Calculate:
i) The expected return on stock S
ii) The expected return on Ali’s portfolio
ili) The standard deviation of her portfolio
 

Transcribed Image Text:

State of the economy Boom Normal Bust Probability 10% 50% 40% Return on stock T -18% 6% 17% Return on stock S -2% 5% 11% State of the economy Boom Normal Bust Probability 10% 50% 40% Return on stock T -18% 6% 17% Return on stock S -2% 5% 11%

Answer rating: 100% (QA)

1 Expected retum probability return Expected retum on stock A PA 010 002 050 ... View the full answer