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Consider the returns of two shares, A and B, under three possible scenarios: Scenario I Stock A -50% Stock B 19% Probability 8% II III
Consider the returns of two shares, A and B, under three possible scenarios: Scenario I Stock A -50% Stock B 19% Probability 8% II III 6% 15% -1% 28% 23% 69% Compute i. the expected returns of the stocks A and B; [3 marks] ii. the standard deviation of the returns of the stocks A and B; (4 marks] iii. the expected return and the standard deviation of the portfolio where the wealth allocated to the A stock is three times that of the B stock. (8 marks]
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