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need help with all of these, please! Consider the following information about two stocks where the probability of an economic boom is 40%: Economic State
need help with all of these, please!
Consider the following information about two stocks where the probability of an economic boom is 40%: Economic State Return A (RA) Return B (RB) Boom 38% 6% Recession 4% 12% You may work with whole numbers or you can work with decimal. a. Calculate the expected return for stock A and stock B (marginal returns for each stock). b. Calculate the standard deviation of stock A and stock B. c. Which stock is riskier? d. Calculate the Covariance and correlation between stock A and stock B. e. Calculate the total risk (standard deviation) of a portfolio, where 1/8 of your money is invested in stock A, and 7/8 of your money is invested in stock B. (Hint: use both the method with the formula for the risk of a portfolio (i.e., using the covariance) and the method of calculating the variance (and standard deviation) from the portfolio returns. f. Calculate the expected return on a portfolio with equal proportions in the risky assets, and 30% in a risk-free asset that has a return close to zero. (Tip: Use your answer in d to find out what the rate of return is on a risk-free asset)Step by Step Solution
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