Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Stocks A and B have the following probability distributions: % Returns Probability A B 0.05 30 45 0.30 12 10 0.40 1 -15 0.25 -6
Stocks A and B have the following probability distributions:
% Returns | ||
Probability | A | B |
0.05 | 30 | 45 |
0.30 | 12 | 10 |
0.40 | 1 | -15 |
0.25 | -6 | -30 |
a) Calculate the expected rate of return for each stock. b) Calculate the standard deviation for each stock. c) Calculate the coefficient of variation for each stock. d) If you form a 50-50 portfolio of the two stocks, calculate the expected rate of return, the standard deviation and the coefficient of variation for the portfolio. (Remember, you must calculate a new range of outcomes for the portfolio.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started