Show your work please

Problem Five (15 marks) You work for a large investment management firm. The analysts with your firm have made the following forecasts for the returns of stock A and stock B: EXTREMELY WEAK VERY VERY WEAK VERY WEAK WEAK AVERAGE STRONG VERY STRONG VERY VERY STRONG EXTREMELY STRONG Probability 3% 8% 12% 16% 22% 16% 12% 8% 3% 100.0% Stock A 85% 65% 35% 25% 20% -10% -17% -45% -55% Stock B -70% -55% -45% -20% 30% 45% 55% 60% 75% Calculate the expected returns, variance and the standard deviations for stock A and B. b) What is the covariance of returns for Stock A and Stock B? What is the correlation coefficient for Stock A and Stock B? c) What is the expected return and standard deviation of a portfolio where 20% of the portfolio is in stock A and 80% of the portfolio is in stock B? d) Create a table that has the expected return and standard deviation for different weights in each stock. This can be done using an excel data table. Start with 100% in A and zero in B, and increments of 10%, complete the table. The last row, will have 0% in A and 100% in B. Then chart (or graph) your results. weight in weight in B A Portfolio Standard deviation portfolio expected return Link to the answer for 20% and 80%, let the weight in A Link to the answer for 20% and change. 80%, let the weight in A change... 0% 100% 10% 90% 20% 80% 30% 40% SOA 70% 60% 5.00 VERY STRONG VERY VERY STRONG EXTREMELY STRONG 12% 8% 3% 100.0% -17% -45% -55% 55% 60% 75% a) Calculate the expected returns, variance and the standard deviations for stock A and B. b) What is the covariance of returns for Stock A and Stock B? What is the correlation coefficient for Stock A and Stock B? c) What is the expected return and standard deviation of a portfolio where 20% of the portfolio is in stock A and 80% of the portfolio is in stock B? d) Create a table that has the expected return and standard deviation for different weights in each stock. This can be done using an excel data table. Start with 100% in A and zero in B, and increments of 10%, complete the table. The last row, will have 0% in A and 100% in B. Then chart (or graph) your results. weight in B weight in A portfolio expected return Portfolio standard deviation Link to the answer for 20% and 80%, let the weight in A change... Link to the answer for 20% and 80%, let the weight in A change... 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Note: All calculations should be rounded to one decimal place if you are using percentages, if you are using decimals then the answer should be rounded to three decimal places