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please show all work including any formulas and explanations Using the following information to answer question 3 and 4. Walker is also forecasting risk and
please show all work including any formulas and explanations
Using the following information to answer question 3 and 4. Walker is also forecasting risk and return for equity in May. He is looking at stock A, stock B, and a portfolio of both stock A, and B. Will estimates that stock A has 50% chance to have -5.5% in May during the Bust scenario. On the other hand, stock A may run its good streak and has 30% chance to earn a 15% return during the Boom or a 20% chance to earn a 7.5% during the Normal case. Similarly, when Walker forecasts risk and return for stock B, he estimates that B has 50% chance to earn an 1.25% return during Bust, 30% chance to earn a 3.5% return during Boom and a 20% chance to earn a 2% return during Normal in May. 3. Walker wants to form a portfolio by investing equally in A and B. Calculate the expected risk and return for this portfolio a 4. Walker wants to invest more in A and less in B. Thus, he decides that a 30% investment in A and subsequently a 70% investment in B will help him achieve this goal. He has also calculated that the portfolio of 30% Investment in A and the rest in B will earn a 6.95% during Boom, 3.65% during Normal and -0.775% during Bust. Calculate the expected risk and return for this portfolio Step by Step Solution
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