Question
Suppose we have the following projects on two stocks. Assume the correlation among the two assets returns is 0.8 State of Economy Probability Stock A
Suppose we have the following projects on two stocks. Assume the correlation among the two assets returns is 0.8
| State of Economy | Probability | Stock A | Stock B |
| Recession | 0.4 | -3% | -6% |
| Slow | 0.1 | 5 | 10 |
| Average | 0.3 | 12 | 9 |
| Good | 0.2 | 8 | 3 |
a. Find the expected return of shares A and B.
b. Find the standard deviation of shares A and B.
c. Find the investment percentage needed in A and B shares to create the minimum variance portfolio.
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A Practical Guide To Quantitative Finance Interviews
Authors: Xinfeng Zhou
1st Edition
1735028800, 978-1735028804
