Question: The table below provides a probability distribution for the returns on stocks A and B. Return on Return on State Probability Stock A Stock B
The table below provides a probability distribution for the returns on stocks A and B. Return on Return on State Probability Stock A Stock B 20% 5% 50% 2 30% 10% 30% 3 30% 15% 10% 20% 20% -10% Using the table above: Calculate A. The expected return of Stock A and B (4 marks) B. The risk of Stock A and B (6 marks) c. The expected return of the portfolio using a weight of 75% and 25% for Stock A and B respectively (2 marks) D. The risk of the portfolio using a correlation coefficient of (-1) and a weight of 75% for A and 25% of stock B (8 marks) E. Find the expected return on a stock given that the risk-free rate is 6%, the expected return on the market portfolio is 12%, and the beta of the stock is 2. (2 mark) r. Find the beta on a stock given that its expected return is 16%, the risk-free rate is 4%, and the expected return on the market portfolio is 12%
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