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    Expected Rate of Return and Stock variance and Standard Deviation

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    1) Given the following data, What is the weight of security 1? Of security 2? 3? What is the expected return on the portfolio?

    Security 1 ; $5,000 invested; Expected return 7%
    Security 2; $7,000 invested; Expected return 9%
    Security 3; $9,000 invested; Expected return 12%

    2) The expected possible outcomes for Roxy Stock are below; what is the expected standard deviation of Roxy Stock?

    State Probability Return
    Super Boom 10% 35%
    Boom 15% 20%
    Expansion 45% 15%
    Recession 30% -5%

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    Solution Summary

    The weight of three securities are calculated. After completing the calculation, the expected return of the portfolio is calculated. This solution also includes a calculation for variance of a stock based on the four different returns and the probability of the return. After completing the variance calculation, the standard deviation of the stock is calculated.