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a) Calculate the portfolios expected return and standard deviation if you invest 30% in Stock A, 30% in Stock B, 30% in Stock C and
a) Calculate the portfolios expected return and standard deviation if you invest 30% in Stock A, 30% in Stock B, 30% in Stock C and 10% in Stock D. | |||||
b) In order to achieve a portfolio with zero standard deviation, calculate the amount of investment weights on Stock A and Stock B. | |||||
c) Draw a graph and show the returns and standard deviations of each stock on X and Y axises. Also, show your portfolio's return and standard deviation values on the same graph and discuss your portfolio's performance among other stocks. | |||||
Market Condition | Probability of Occurrence | Return on | Return on | Return on | Return on |
Stock A | Stock B | Stock C | Stock D | ||
Growth | 30% | -10% | 80% | 120% | 20% |
Normal | 40% | 45% | 50% | 0% | 20% |
Recession | 30% | 85% | 20% | -30% | 20% |
Expected Return | |||||
Variance | |||||
Standard Deviation | |||||
Return per Unit Risk |
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