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3. The returns on shares X and Y vary depending on the state of economic growth Probability of economic state occurring 0.20 0.60 0.20 Returns
3. The returns on shares X and Y vary depending on the state of economic growth Probability of economic state occurring 0.20 0.60 0.20 Returns on X if economic state occurs (%) 25.00 10.00 5.00 Returns on Y if economic state occurs (%) 10.00 8.00 5.00 State of economyy Boom Growth Recession a. Calculate the expected return and standard deviation for share X (10% of the total marks) b. Calculate the expected return and standard deviation for share Y (10% of the total marks) c. What is the covariance between returns on X and returns on Y? (10% of the total marks) d. Determine a portfolio expected return and standard deviation if 40% of a fund is devoted to X and 60% devoted to Y (10% of the total marks) (100% in total)
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