Suppose you are considering two stocks, x and y. use the following scenario to analysis to answer the questions bear market normal market bull market

probability          0.25     0.4       0.35

stock A              -20      15          45

STOCK B         -15       20          10

(A) What are the expected rate of returns , and the standard deviation of returns, of stock A and B

(B) Assume that your $30000 portfolio, you invest $20000 in stock X and $10000 in stock Y . What are the expected return and the standard deviation on your portfolio.

(C) If you were to use the wo stocks to minimise the portfolio risk , what would be the investment proportions in the minnimum variance portfolio of stock X and Y? what are the expected return and standard deviation on the minimum variance portfolio

Answer rating: 100% (QA)

A To calculate the expected rate of return for each stock we need to multiply the probability of each scenario by the return for that scenario and sum ... View the full answer