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    The joint probability distribution

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    The joint probability distribution on the returns of two securities X and Y is shown in the table below.

    Y 7 10 14
    8 0.12 0.03 0.3
    9 0.15 0.09 0.06
    10 0.05 0.18 0.02

    a. Calculate the expected return for each security
    b. Calculate the variance and standard deviation for each security
    c. Suppose an investor would like to constitute a portfolio of 40 % of X and 60 % of Y, what will be the expected return and the risk associated to this portfolio?

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    Solution Summary

    The joint probability distribution is determined.