There are two stocks (stock 1 and stock 2) in a portfolio and two possible states...
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There are two stocks (stock 1 and stock 2) in a portfolio and two possible states of economy (good and bad) that may occur. The return of stock 1 (2) is 9% (12%) in the good state that has a probability of 60%. The return of stock 1 (2) is -2% (-4%) in the bad state that has a probability of 40%. The portfolio allocates $3,000 to stock 1 and $7,000 to stock 2 (the given information is the same as in the previous question). What is the return standard deviation of this portfolio? There are two stocks (stock 1 and stock 2) in a portfolio and two possible states of economy (good and bad) that may occur. The return of stock 1 (2) is 9% (12%) in the good state that has a probability of 60%. The return of stock 1 (2) is -2% (-4%) in the bad state that has a probability of 40%. The portfolio allocates $3,000 to stock 1 and $7,000 to stock 2 (the given information is the same as in the previous question). What is the return standard deviation of this portfolio?
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To calculate the return standard deviation of a portfolio we need the individual stock returns and their respective weights in the portfolio Step 1 Ca... View the full answer
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