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Use the information below to answer question a to d State of Economy Probability Growth 0.20 Normal 0.50 Boom 0.30 Stock A 10% 15%

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Use the information below to answer question a to d State of Economy Probability Growth 0.20 Normal 0.50 Boom 0.30 Stock A 10% 15% 25% * a. What is the expected return for Stock A? and Stock B? b. Calculate the variance for both of the stocks individually. c. Measure the risk for stock A and stock B. 20 points Stock B 20% 4% 18% (5 marks) (5 marks) (5 marks) d. Calculate the Beta return of the stocks if you have equal investment in both stocks and the correlation between the stocks is (- 0.50).

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Solution a Expected return for Stock A The expected return for Stock A can be calculated using the probabilityweighted average of the possible returns ... blur-text-image

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