Question
An investment firm is considering a portfolio of equal weighting in a cyclical stock, CDN and a countercyclical stock, NNP. The firm has $20,000 to
An investment firm is considering a portfolio of equal weighting in a cyclical stock, CDN and a countercyclical stock, NNP. The firm has $20,000 to invest. It is expected that there will be three economic states: Good, Average, and Bad, each with equal probability of occurrence. TheSummer 2022 Assignment #1 2 table below shows the percentage return for stocks CDN and= NNP under the different economic states. Using this information please answer the following questions: State of economy Return for stock CDN Return for stock NNP Good 12% -8% Average 5% 2% Bad 1% 14% Expected return ?? % 2.67% Standard deviation 4.55% ?? % a. What is the expected return for stock CDN? (2 marks) b. What is the standard deviation of the returns of stock NNP? (4 marks) c. What is the expected return of this portfolio? (2 marks)
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