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Suppose that there are three future states, boom economy, normal economy and recession economy. Each has a chance of occurrence of 25%, 50%, and 25%.
Suppose that there are three future states, boom economy, normal economy and recession economy. Each has a chance of occurrence of 25%, 50%, and 25%. Stock A's return under the three states are 10%, -5%, -10%, and Stock B's return are -10%, 5%, and 10% respectively. What is the risk of forming an equal weighted portfolio of the stocks? A. 1.56% B. 0.5% C.O D. 1.87% O E. 1.77%
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