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Please solve second half There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $67. The

image text in transcribedPlease solve second half

There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $67. The price of Stock A next year will be $56 if the economy is in a recession, $79 if the economy is normal, and $89 if the economy is expanding. The probabilities of recession, normal times, and expansion are 12, .68, and .20, respectively. Stock A pays no dividends and has a correlation of .62 with the market portfolio. Stock B has an expected return of 13.2 percent, a standard deviation of 33.2 percent, a correlation with the market portfolio of 16, and a correlation with Stock A of.28. The market portfolio has a standard deviation of 17.2 percent. Assume the CAPM holds. a-1. What is the return for each state of the economy for Stock A? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a- What is the expected return of Stock A? (Do not round intermediate calculations 2. and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a- What is the variance of Stock A? (Do not round intermediate calculations and round 3. your answer to 4 decimal places, e.g., 32.1616.) a- What is the standard deviation of Stock A? (Do not round intermediate calculations 4. and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a- What is the beta of Stock A? (Do not round intermediate calculations and round 5. your answer to 3 decimal places, e.g., 32.161.) a- What is the beta of Stock B? (Do not round intermediate calculations and round 6. your answer to 3 decimal places, e.g., 32.161.) a-1. Recession -16.42% Normal 17.91 % 34.84 % Expansion 16.78% a-2. Expected return a-3. Variance 0.0185 a-4. Standard deviation 13.59% 0.490 a-5. Beta of Stock A a-6. Beta of Stock B 0.310 If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer? O Stock B O Stock A b-1. What is the expected return of a portfolio consisting of 70 percent of Stock A and 30 percent of Stock B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- What is the standard deviation of a portfolio consisting of 70 percent of Stock A and 2. 30 percent of Stock B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the beta of the portfolio in part (b)? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b-1. Expected return % % b-2. Standard deviation c. Beta of the portfolio

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