Given the following information below for Stock A, calculate its standard deviation. 1 0-(R, - R... xp Where: pi = Probability of some state i R: = Expected return in state i Rmean = Expected return - Weighted Ri for each State i Ri= pi = Probability of Economic State i some state i Expected return in state Weak 0.10 -50% Below Average 0.20 -5% Average 0.40 16% Above Average 0.20 25% Strong 0.10 60% (Sum Column for Stock A Expected Return) Rmean = Bring the answer you calculated for Rmean = Expected return above and enter it in the correct column below the finish calculating the Standard Deviation. State 1 pi= Ri= Rmean = (Ri - Rmean) (Ri - Rmean) (Ri - Rmean) xp Sum of Column = Variance) = Square Root of Variance = Standard Deviation = Suppose you manage a $4 million fund that consists of four stocks with the following investments. What is the Beta of the portfolio? Stock Investment Beta % Invested in Each Stock Weighted Beta A $400,000 1.50 B $600,000 -0.50 $1,000,000 1.25 D 2,000,000 0.75 Portfolio Beta If the Expected Return of the Market, E(Rm) = 14% and the Risk Free rate, Rf = 6%, what if the Expected Return of the Portfolio, E(Rp)? Use the Capital Asset Pricing Model: E(Rp) = RF+Bp* (E(Rm) - Rf)