Question: Using the following returns, calculate the average returns, the variance and standard deviations for X and Y. Probability Return X Return Y 25% 27% 0%

  1. Using the following returns, calculate the average returns, the variance and standard deviations for X and Y.

Probability

Return X

Return Y

25%

27%

0%

50%

10%

8%

25%

5%

20%

  1. Use the information given in 4 to find expected return and variance for a portfolio that consists of 30% in X and 70% in Y. Do you notice any benefits to investing in the portfolio rather than each stock individually?

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