******* ANSWER USING EXCEL******

You work for a large investment management firm. The analysts with your firm have made the following forecasts for the returns of stock A and stock B: VERY VERY WEAK WEAK AVERAGE STRONG VERY VERY STRONG Probability 15.00% 20.00% 35.00% 20.00% 10.00% 100.0% Stock A Stock B 65.00% -65.00% 30.00% -20.00% 25.00% 35.00% -20.00% 45.00% -55.00% 65.00% Answer the following questions: a) Calculate the expected returns, variance and the standard deviations for stock A and B. b) What is the covariance of returns for Stock A and Stock B? What is the correlation coefficient for Stock A and Stock B? c) What is the expected return and standard deviation of a portfolio where 40% of the portfolio is in stock A and 60% of the portfolio is in stock B? d) Create a table that has the expected return and standard deviation for different weights in each stock. This can be done using an excel data table. Start with 100% in A and zero in B, and increments of 10%, complete the table. The last row, will have 0% in A and 100% in B. Then chart (or graph) your results. weight in B weight in A Portfolio standard deviation portfolio expected return Link to the answer for 30% and 70%, let the weights change... Link to the answer for 30% and 70%, let the weights change... 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%