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HELP ME 5. Current price of stock X and Y are $54 and $32 respectively. A financial analyst of ABC Security Company forecasts the price
HELP ME
5. Current price of stock X and Y are $54 and $32 respectively. A financial analyst of ABC Security Company forecasts the price of stock X and Y after 1 year as following: Economic conditions Probability Price of stock X Price of stock Y Bad 0.2 42 27 OK 0.4 58 35 Good 0.4 65 40 a. What are expected return and standard deviation of the two stocks. b. What are expected return and standard deviation of the risky portfolio P which invests 60% in A stock and 40% in B stock. c. How much should investor invest in risky portfolio P in order to construct an optimized complete portfolio, given risk-free rate is 5% and A = 2. d. What are expected return and standard deviation of optimized complete portfolio. e. There is another alternative portfolio which has expected return 18% and standard deviation 22%. Which portfolio should the investor invest in? 5. Current price of stock X and Y are $54 and $32 respectively. A financial analyst of ABC Security Company forecasts the price of stock X and Y after 1 year as following: Economic conditions Probability Price of stock X Price of stock Y Bad 0.2 42 27 OK 0.4 58 35 Good 0.4 65 40 a. What are expected return and standard deviation of the two stocks. b. What are expected return and standard deviation of the risky portfolio P which invests 60% in A stock and 40% in B stock. c. How much should investor invest in risky portfolio P in order to construct an optimized complete portfolio, given risk-free rate is 5% and A = 2. d. What are expected return and standard deviation of optimized complete portfolio. e. There is another alternative portfolio which has expected return 18% and standard deviation 22%. Which portfolio should the investor invest inStep by Step Solution
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