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Consider the following information about the two stocks. StateProbabilityStock AStock BWorst0.1-20%10%Bad0.2-10%8%Average0.312%2%Good0.217%6%Best0.223%9% a. Calculate the expected rates of return and standard deviations for each stock. (6
Consider the following information about the two stocks.
StateProbabilityStock AStock BWorst0.1-20%10%Bad0.2-10%8%Average0.312%2%Good0.217%6%Best0.223%9%
a. Calculate the expected rates of return and standard deviations for each stock. (6 points)
b. If the correlation between Stocks A and B is -0.43 and you decide to invest 70% of your funds in Stock A, calculate thereturn and standard deviation of a portfolio, consisting of these two stocks. (3 points)
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