Question
Please answer all if possible 1) Consider the following probability distributions for stocks A and B: State Probability Return on A Return on B 1
Please answer all if possible
1) Consider the following probability distributions for stocks A and B:
State | Probability | Return on A | Return on B |
1 | .3 | 7% | -9% |
2 | .5 | 11% | 14% |
3 | .2 | -16% | 26% |
a) What is the correlation between stocks A and B? Please give your answer in decimal form rounded to the third decimal place.
b) What is the expected return on stock A? Please give your answer in percent rounded to the nearest basis point.
c) What is the expected return on stock B? Please give your answer in percent rounded to the nearest basis point.
d) If you invest 25% of your portfolio in stock A and the rest (75%) in stock B, what is your portfolio's standard deviation? Please give your answer in percent rounded to the nearest basis point.
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