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Rate of returns if state occurs Consider the following information for two stocks: (5 marks) State of Probability of Economy State of Economy Recession .35

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Rate of returns if state occurs Consider the following information for two stocks: (5 marks) State of Probability of Economy State of Economy Recession .35 Expansion .65 Stock X Stock Y -.08 -.05 .48 .29 1.1 Calculate the expected return and standard deviation for the two stocks. Which stock would you prefer and why? (2 marks) 1.2 Compute the portfolio's expected return and its standard deviation. Assume that portfolio weights in Stock X and Y are 40% and 60% respectively

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