Question
The following table provides stock return distributions in the coming year for three companies, A, B, and C. State of Economy Probability of State of
The following table provides stock return distributions in the coming year for three companies, A, B, and C.
| State of Economy | Probability of State of Economy | Stock A Rate of Return | Stock B Rate of Return | Stock C Rate of Return |
| Normal | 0.65 | 14.3% | 16.7% | 18.2% |
| Recession | 0.35 | -9.8% | 5.4% | -26.9% |
(a) Consider a portfolio that is invested 40 percent in Stock A, 30 percent in Stock B, and the remainder in Stock C. What is the expected return on the portfolio?
(b) What is the standard deviation on the portfolio returns above?
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Succeeding in Business with Microsoft Excel 2013 A Problem Solving Approach
Authors: Debra Gross, Frank Akaiwa, Karleen Nordquist
1st edition
978-1285099149, 9781285963969, 1285099141, 1285963962, 978-1285715346
