Question
Consider the following stocks State Probability Ford Apple recession 0.2 -5% 15% normal 0.5 10% 10% boom 0.3 15% 10% a. Find the expected return
Consider the following stocks
| State | Probability | Ford | Apple |
| recession | 0.2 | -5% | 15% |
| normal | 0.5 | 10% | 10% |
| boom | 0.3 | 15% | 10% |
a. Find the expected return and standard deviation for each stock.
b. Find the covariance and correlation between the two stocks, do you think we are diversifying well by investing in these two stocks?
c. Find the expected return and standard deviation for a portfolio that has 60% invested in Ford and 40% invested in Apple?
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Fundamentals Of Management
Authors: Ricky Griffin
10th Edition
9780357517345
