Finance

6. value: 6.25 points

Consider the following information:
State of Economy Probability of State of Economy Portfolio Return if State Occurs
  Recession 0.23 0.19
  Normal 0.48 0.20
  Boom 0.29 0.28

 

Calculate the expected return. (Round your answer to 2 decimal places. (e.g., 32.16))

 

  Expected return %

7. value: 6.25 points

Consider the following information:

 

Rate of Return If State Occurs
  State of Probability of
  Economy State of Economy Stock A Stock B
  Recession 0.15 0.06 0.19
  Normal 0.60 0.09 0.10
  Boom 0.25 0.14 0.27

 

Calculate the expected return for the two stocks. (Round your answers to 2 decimal places. (e.g., 32.16))

 

Expected return
  Stock A %
  Stock B %

 

Calculate the standard deviation for the two stocks. (Do not round intermediate calculations andround your final answers to 2 decimal places. (e.g., 32.16))

 

Standard deviation
  Stock A %
  Stock B %

8. value: 6.25 points

A portfolio is invested 10 percent in Stock G, 50 percent in Stock J, and 40 percent in Stock K. The expected returns on these stocks are 7 percent, 13 percent, and 15 percent, respectively. What is the portfolio’s expected return? (Round your answer to 2 decimal places. (e.g., 32.16))

 

  Portfolio’s expected return %

Solution:

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