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4. Consider the following possible returns on stock A, stock B, and the market portfolio over the next year: State of economy Probability of state
4. Consider the following possible returns on stock A, stock B, and the market portfolio over the next year: State of economy Probability of state Return on Return on Return on occurring stock A stock B market Recession 0.2 -6% 20% -5% Normal 0.5 10% 8% 8% Boom 0.3 18% -20% 12% (a) What are the expected returns on stock A, stock B, and the market? (b) What are the standard deviations of returns on stock A, stock B, and the market? (c) What is the correlation between the returns on the two stocks
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