Explore BrainMass

Expected Return and Standard Deviation of Return of Stock Portfolio

The probability that the economy will contract is 0.2. The probability of moderate growth is 0.6, and the probability of a rapid expansion is 0.2. If the economy contracts, you can expect a return on your portfolio of 5 percent. With moderate growth, your return will be 8 percent. If there is a rapid expansion, your portfolio will return 15 percent.
1. What is your expected return?
2. What is the standard deviation of the return?

Solution Preview

Expected return = Sum of (Probability of event i * return when ...

Solution Summary

The solution calculates the expected return and standard error of the stock portfolio