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1. Returns on the common stock of Wheatland Transit Corporation (WT) and Pinedale Pottery Corporation (PP) are as follows for each of the two possible
1. Returns on the common stock of Wheatland Transit Corporation (WT) and Pinedale Pottery Corporation (PP) are as follows for each of the two possible economic scenarios:
Scenario | Probability | WT | PP |
Boom | 55% | +7% | +13% |
Bust | 45% | +6% | +1% |
Find the expected return and standard deviation for a portfolio invested 60% in WT and 40% in PP. If the beta for WT is .5 and the beta for PP is 1, what is the portfolio beta? (You must give three answers here, the expected return on the portfolio, the standard deviation for the portfolio, and the portfolios beta.)
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