2. You are trying to develop a strategy for investing in two different stocks. The anticipated...

 

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2. You are trying to develop a strategy for investing in two different stocks. The anticipated annual return (per $1000) investment in each stock under four different economic conditions has the following probability distributions: Probability Economic Condition Stock Y Return Stock X Return -80 0.1 Recession 80 0.2 Slow Growth 0 160 0.4 Moderate Growth 100 -40 0.3 Fast Growth 120 -120 (a) Calculate Expected return E (X) AND E (Y) (b) Calculate SD for Stock X and Stock Y (c) Calculate Covariance (X,Y). Comment on your investment strategy. (d) Suppose that you invest 60% into Stock X and 40 % into Stock Y. Calculate Portfolio Expected Return and Portfolio Risk 2. You are trying to develop a strategy for investing in two different stocks. The anticipated annual return (per $1000) investment in each stock under four different economic conditions has the following probability distributions: Probability Economic Condition Stock Y Return Stock X Return -80 0.1 Recession 80 0.2 Slow Growth 0 160 0.4 Moderate Growth 100 -40 0.3 Fast Growth 120 -120 (a) Calculate Expected return E (X) AND E (Y) (b) Calculate SD for Stock X and Stock Y (c) Calculate Covariance (X,Y). Comment on your investment strategy. (d) Suppose that you invest 60% into Stock X and 40 % into Stock Y. Calculate Portfolio Expected Return and Portfolio Risk