Question
Consider the following information: State of the Economy Probability of State of the Economy Return on A % Return on B % Boom 0.40 10
Consider the following information:
| State of the Economy | Probability of State of the Economy | Return on A % | Return on B % |
| Boom | 0.40 | 10 | 4 |
| Growth | 0.20 | -4 | 0 |
| Normal | 0.20 | 24 | 16 |
| Recession | 0.20 | 16 | 20 |
a) What is the expected return for A For B?
b) What is the standard deviation for A For B?
c) What is the expected return on a portfolio of A and B that is 30% invested in A and the remainder in B?
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
5th edition
1259289907, 978-1259289903
