Question
Consider the following information about three stocks: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B
| Consider the following information about three stocks: Rate of Return if State Occurs | ||||
| State of Economy | Probability of State of Economy | Stock A | Stock B | Stock C |
| Boom | 0.30 | 50.0% | 12.0% | 20.0% |
| Average | 0.45 | 15.0% | -5.0% | 6.0% |
| Recession | 0.25 | -8.0% | 2.0% | -3.2% |
Your portfolio manager has invested 30% of your money in Stock A, 50% in Stock B, and the rest in Stock C.
a) What is the expected return of your portfolio?
b) What is the standard deviation of Stock B?
c) What is the covariance between Stocks B and C?
d) What is the correlation coefficient between Stocks B and C?
e) What is the standard deviation of your portfolio?
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Banker To The World
Authors: William Rhodes
1st Edition
0071704256, 978-0071704250
