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PLEASE SHOW ALL WORK ON PAPER (So I can understand the steps taken) You have 50,000 dollars that you plan to invest in a portfolio
PLEASE SHOW ALL WORK ON PAPER (So I can understand the steps taken)
You have 50,000 dollars that you plan to invest in a portfolio with two stocks, A and B. The price of stock A is currently $20. You expect that the stock price will be: A) $60 if the economy is booming (which could happen with probability 25%), B) $25 if the economy continues at its current state (which could happen with probability 40%) C) $5 if the economy is in recession (which could happen with probability 35%) The price of stock B is currently $40. You expect that the stock price will be: A) $47 if the economy is booming (which could happen with probability 25%), B) $43 if the economy continues at its current state (which could happen with probability 40%) C) $39 if the economy is in recession (which could happen with probability 35%) ii) Assume that you invest $10,000 in stock A and $40,000 in stock B. What are the portfolio weights? iii) Find the expected return and standard deviation of the portfolio with the weights of part (ii)Step by Step Solution
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