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Consider the following information: Scenario Probability X return rate Y return rate Boom 25% 15% 10% Normal 60% 10% 9% Recession 15% 5% 10% Calculate
Consider the following information:
Scenario Probability X return rate Y return rate
Boom 25% 15% 10%
Normal 60% 10% 9%
Recession 15% 5% 10%
Calculate the expected return and standard deviation of returns of each stock.
Then calculate the expected return and standard deviation of return for a portfolio with an investment of $6000 (60%) in stock X and $4000 (40%) in stock Y. To do so, you need to calculate the variance and standard deviation of each stock and the covariance of returns between stock X and stock Y.
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