Question
1. Snowflake Inc.s stock can return either -10% or 20% annually with equal probability, and Peloton Incs stock can return either -15% or 25% annually
1. Snowflake Inc.s stock can return either -10% or 20% annually with equal probability, and Peloton Incs stock can return either -15% or 25% annually with equal probability. The correlation between Snowflake and Pelotons stock returns is 0. You have $100 to invest, and you decide to build a portfolio P which invests $50 in Snowflake and $50 in Peloton.
a. What is Snowflakes expected return?
b. What is Snowflakes standard deviation?
c. What is portfolio Ps expected return?
d. What is portfolio Ps standard deviation? Instead of splitting $100 equally in Snowflake and Peloton, you invest $100 in Snowflake for the first year, and then you sell Snowflake and use the proceeds to invest in Peloton for the second year.
e. What is your expected return after two years?
f. What is the standard deviation of your return after two years?
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