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Expected return and standard deviation of return

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Use the following info to answer the 2 questions:

state of the economy price of stock a 1 year later probability

recession 40 0.1
normal 55 0.8
expansion 60 0.1

current price of stock a - 50$
expected return of stock B - 0.09
standard deviation of returns for stock b - 0.12
correlation between returns for stocks A and B - 0.6
variance of returns for A - 0.0096

a) What is the expected return for a portfolio that is made up of 70% in stock A and the rest in stock b?

b) What is the standard deviation for a portfolio that is made up of 70% in stock A and the rest in Stock b?

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Solution Summary

Expected return and standard deviation of return for a portfolio have been calculated.

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