Question
An investor is considering the purchase of Gryphon stock, which has returns given in the table below. Scenario Probability Rate of Return Recession 0.22 -3%
An investor is considering the purchase of Gryphon stock, which has returns given in the table below.
Scenario Probability Rate of Return
Recession 0.22 -3%
Normal Econom. 0.57 9%
Boom 0.21 12%
Calculate the expected return and standard deviation of Gryphon. Round your answers to 2 decimal places.
E(r)= 6.99
Standard dev= 5.43
Here is the next part of question.
The investor decides to diversify by investing $5,000 in Gryphon stock and $10,000 in Royal stock, which has an expected return of 8% and a standard deviation of 9.4%. The correlation coefficient for the two stocks' returns is 0.4. Calculate the expected return and standard deviation of the portfolio.Round your answers to 2 decimal places.
Enter your answers below.
E(rp)=
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started