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Old MathJax webview Finacial according 2 Please show all workings thank you Question B added (C) Suppose you use JMD$2,000,000 to construct a portfolio comprising

Old MathJax webview

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Finacial according 2 Please show all workings thank you

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Question B added

(C) Suppose you use JMD$2,000,000 to construct a portfolio comprising of stocks A, B and C such that you invest $600,000 in stock A, $900,000 in stock B and the remainder in stock C. Also you have done some research and estimated the Beta (b) of the stocks to be: stock A=0.50, stock B = 0.80 and stock C = 0.25 Using the expected returns calculated for each stock in part (b) above, calculate the following: (1) The expected return on the portfolio (4 marks) The expected beta of the portfolio (4 marks) (ii) (b) The following table represents information about three stocks: Return of Stock C under different state of nature -25% State of Nature Probability of Return of Stock A Return of Stock B State of Nature under different under different state of nature state of nature Boom 0.3 20% 25% Normal 0.4 - 10% 20% Recession 0.2 5% 10% Recovery 0.1 30% -25% 20% 10% 11% (i) What is the expected return on each stock? What is the standard deviation of returns for each stock? What is the coefficient of variation for each stock? Which stock is more volatile? Why? (6 marks) (6 marks) (3 marks) (2 marks) (iii) (iv)

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