Question
Consider following Scenario Analysis State of Economy Probability Stocks Bonds Recession 0.2 -8% 18% Normal Economy 0.4 16% 9% Boom 0.4 22% 3% a) Calculate
Consider following Scenario Analysis
| State of Economy | Probability | Stocks | Bonds |
| Recession | 0.2 | -8% | 18% |
| Normal Economy | 0.4 | 16% | 9% |
| Boom | 0.4 | 22% | 3% |
a) Calculate the expected return of Stocks? b) Which investment is least risky on the basis of co-efficient of variation (CV)? Also which option you think its better for investment? c) Calculate the portfolio standard deviation? d) Calculate the Portfolio Expected Return if funds allocation is 60% in stocks and 40% in bonds?
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Analysis for Financial Management
Authors: Robert c. Higgins
8th edition
73041807, 73041803, 978-0073041803
