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(E) Consider information given in the table below and answers the question asked thereafter: State Probability Return on Stock A Return on Stock B A
(E) Consider information given in the table below and answers the question asked thereafter: State Probability Return on Stock A Return on Stock B A 0.20 10 % 8% B 0.15 6 % 18% 0.15 20% 12 % D 0.18 5% -10% E 0.12 -10% 20% F 0.20 8 % 25 % i. ii. Calculate expected return on each stock? On the basis of this measure, which stock you will choose? Calculate standard deviation of the returns on each stock? On the basis of this measure, which stock you will choose? iv. Calculate coefficient of variance of the returns on each stock? On the basis of this measure, which stock you will choose? Calculate covariance and coefficient of correlation between the returns of the stocks A and B. Now suppose you have $150,000 to invest and you want to a hold a portfolio comprising of $45,000 invested in stock A and remaining amount in stock B. Calculate risk and return of your portfolio. V
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