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Hey, I only want part B answered! Thanks P7-16 You are given the following data on several shares: State of the economy Probability Returns in
Hey, I only want part B answered! Thanks
P7-16 You are given the following data on several shares: State of the economy Probability Returns in each state of economy Gere Mining Reubenfeld Films DeLorean Automotive 25% 40% 24% -20% Boom Expansion Recession 50% 12% 10% 12% 25% -20% -12% -40% a Calculate the expected return and standard deviation for each share. b Calculate the expected return and standard deviation for a portfolio invested equally in Gere Mining and Reubenfeld Films. How does the standard deviation of this portfolio compare to a simple 50-50 weighted average of the standard deviations of the two shares? c Calculate the expected return and standard deviation for a portfolio invested equally in Gere Mining and DeLorean Automotive. How does the standard deviation of this portfolio compare to a simple 50-50 weighted average of the standard deviations of the two shares? d Explain why your answers regarding the portfolio standard deviations are so different in parts (b) and (c)
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