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CDM Wealth Management (CDM) Pty Ltd is evaluating the prospects of a portfolio comprised of ABC and DEF stock. Mr John Smyth, an analyst at
CDM Wealth Management (CDM) Pty Ltd is evaluating the prospects of a portfolio comprised of ABC and DEF stock. Mr John Smyth, an analyst at CDM, constructed the following forecasts of the prospects of the two stocks over the coming year. State of the Economy Strong Average Weak Probability of the state occurring 25% 50% 25% ABC expected return +20% +10% -5% -15% DEF expected return +12% +20% What will be the expected standard deviation of ABC stock? 7.97% 0.80% O 8.93% 12.59%
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