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Question 4 [25%) State of Economyr Probability X's return Y's return GDP growth = 8% 0.30 0.23 {112 GDP growth = 4% 0.59 0.06 {l
Question 4 [25%) State of Economyr Probability X's return Y's return GDP growth = 8% 0.30 0.23 {112 GDP growth = 4% 0.59 0.06 {l GDP growth = 1% 0.21} {1139 40112 3. Calculate the correlation between rates of return of X and Y using the above information. h. Construct a portfolio, with X and Y, which has an expected return of 18%. What is the portfolio's standard deviation?I c. vaour portfolio invests 65% in X and 35% inY, (i) calculate its return when GDP growth is 8%. (ii) calculate its return when GDP growth is 4%. (iii) calculate its return when GDP growth is 1%. (iv) calculate its expected return and standard deviation
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