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Below are the returns for two assets under different states of the economy. State Boom Normal Recession Probability 1/3 1/2 1/6 Asset 1 30% 15%
Below are the returns for two assets under different states of the economy.
State | Boom | Normal | Recession |
Probability | 1/3 | 1/2 | 1/6 |
Asset 1 | 30% | 15% | 0% |
Asset 2 | 12% | 9% | 6% |
Find the expected return and standard deviation of a portfolio made up of 70% asset 1 and 30% asset 2.
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