Based on the attached information, calculate the expected return and standard deviation for the two stocks.

Probability of State of Economy Stock P Rate of Return Stock Q Rate of Return
State of Economy
Recession 0.15 0.04 -0.2
Normal 0.75 0.08 0.2
Boom 0.1 0.16 0.6

Expected return= Expected return=Σprobability*return
Stock P =0.15*0.04+0.75*0.08+0.1*0.16= 0.082 or 8.20%
Stock ...

Solution Summary

The solution shows steps to calculate the expected return and standard deviation of two stocks that have different returns in different states of nature- recession, normal, boom. The probabilities of the states of nature are used to calculate the expected return and standard deviation of stocks

Suppose the expectedreturns and standard deviations of stocks A and B are E(Ra) =0.15, E(Rb) = 0.25, Stdev A = 0.1, and Stdev B = 0.2, respectively. Calculate the expectedreturnand standard deviation of a portfolio that is composed of 40% A and 60% B when the correlation between the returns on A and B is 0.5.

Stock A has expectedreturn of 12% and standard deviation of 40%. Stock B has an expectedreturn of 18% and standard deviation of 60%. The correlation coeffecient between stocks A and B is 0.2.
What are the expectedreturnand standard deviation of a portofolio invested 30% in stock A and 70% in stock B?

Stock A has an expectedreturn of 12% and a standard deviation of 40%. Stock B has an expectedreturn of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. What are the expectedreturnand standard deviation of a portfolio invested 30% in Stock A and 70% in Stock B?

The expected standard deviation of market returns is 0.20. Sandra has the following four stocks:
Security Standard Dev. Correlation with the Market
A .30 .70
B .75 .30
C

Analyze the risk of a portfolio
Use the data below and consider portfolio weights of .60 in stocksand .40 in bonds.
Rate of Return
Scenario Probability Stocks Bonds
Recession 0.2 -5% 14%
Normal 0.6 15% 8%
Boom 0.2 25% 4%
a. What is the rate of return on the portfolio in

Suppose the expectedreturns and standard deviations of stocks A and B are E(R^A)=0.15, E(r^B)=0.25, s^a=0.1, and s^b=0.2, respectively.
a.Calculate the expested returnand standard deviation portfolio that is composed of 40 percent A and 60 percent B when the correlation between returns on A and B is 0.5.
b. Calculate the