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(a) Consider the following details for two shares, Share A and B. State of economy Probability RA RB Boom 30% 25% 30% Normal 50% 15%
- (a) Consider the following details for two shares, Share A and B.
State of economy | Probability | RA | RB |
Boom | 30% | 25% | 30% |
Normal | 50% | 15% | 20% |
Recession | 20% | 5% | -10% |
- What is the expected return for each share?
- What is the risk for each share?
- What is the expected return on a portfolio consisting of 40% in Share A and 60% in Share B?
- What is the risk of the portfolio in (iii)?
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