Use the following information for the problem. _ _ _ _ _ _ _ _ _ _
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Question:
Use the following information for the problem.
State of Probability of Returns If State of Economy Occurs
Economy State of Economy Stock S Stock T
Boom or or
Normal or or
Recession or or
a Find the expected return of each stock.
Use at least seven decimal places in computations of bc and d below to avoid significant rounding errors.
b Calculate the variance and standard deviation of returns of each stock.
c Compute the covariance and correlation of returns between the two stocks.
d Assume that you invest $ in Stock S and $ in Stock T Find the expected return on the portfolio and the standard deviation of the portfolios return.
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