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Please show the formulas and full work without using excel. You're trying to calculate the expected return, risk premium, variance, and standard deviation of stock
Please show the formulas and full work without using excel.
You're trying to calculate the expected return, risk premium, variance, and standard deviation of stock XYZ. You believe that XYZ has a 20% chance of great performance over the next year, in which case it will generate a 25% stock return. You believe that there is a 30% chance that XYZ will have good performance, and generate a return of 20%. You believe there is a 40% chance that XYZ will have OK performance, and generate a return of 10%, and you believe there is a 10% chance that XYZ will have poor performance, and generate a negative return = -5%. The risk free rate is 5%. What are the expected return, risk premium, variance, and standard deviation of returns for XYZ? You're also trying to calculate the expected return, risk premium, variance, and standard deviation of stock ABC. You believe that ABC has a 10% chance of great performance over the next year, in which case it will generate a 50% stock return. You believe that there is a 60% chance that ABC will have good performance, and generate a return of 15%. You believe there is a 30% chance that ABC will have poor performance, and generate a negative return = -15%. The risk free rate is 5%. What are the expected return, risk premium, variance, and standard deviation of returns for ABC? If we purchased a portfolio by purchasing $300 of XYZ stock and $1200 of ABC stock, what would be the portfolio's expected return, variance, and standard deviation if the two stocks have a correlation of 0.30Step by Step Solution
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