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Suppose you hold a portfolio of two stocks in the healthcare industry. The future outcomes for these stocks depend mainly on the next healthcare bill
Suppose you hold a portfolio of two stocks in the healthcare industry. The future outcomes for these stocks depend mainly on the next healthcare bill to be passed by Congress. The possible outcomes and returns are:
Outcome | Probability | Return for Stock A | Return for Stock B |
1=Republican Bill | 0.5 | 12% | -5% |
2=Democratic Bill | 0.5 | 3% | 20% |
What is the expected return and a standard deviation of a portfolio that has 80% of its value in stock A and 20% in stock B?
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