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    Computation of Return, Variance and Beta

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    You are given the following joint probability distribution of returns:

    State Probability Stock 1 Stock 2
    Good 0.6 20.0% 9.0%
    Bad 0.4 8.0% -6.0%

    Beta of stock 1=1.4
    Beta of stock 2=0.6

    a. Find the expected return on Stock 1,and Stock 2.
    b. Find the variance of return on Stock 1, and Stock 2
    c. Consider a portfolio that is invested 30 percent in Stock 1, 70 percent in Stock 2. Find the expected return on this portfolio.
    d. Find the beta of this portfolio.

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    https://brainmass.com/business/beta-and-required-return-of-a-project/computation-return-variance-beta-184829

    Solution Preview

    You are given the following joint probability distribution of returns:

    State Probability Stock 1 Stock 2
    Good 0.6 ...

    Solution Summary

    This shows the process of computation of return, variance and beta

    $2.19

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