# Computation of Return, Variance and Beta

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.

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