Question
The following table shows the expected returns from six different stocks in three different states of the economy: MAY YOU SHOW EXCEL WORK State of
The following table shows the expected returns from six different stocks in three different states of the economy: MAY YOU SHOW EXCEL WORK
| State of Economy | Probability | Return Stock A | Return Stock B | Return Stock C | Return Stock D | Return Stock E | Return Stock F |
| Growth | 1/3 | 30% | 3% | 15% | 24% | 0% | 18% |
| Status Quo | 1/3 | 22% | 1% | 3% | 6% | 3% | 3% |
| Recession | 1/3 | 20% | 4% | -3% | -6% | 6% | -3% |
- Consider of a portfolio consisting of 50% in Stock A and 50% in Stock B. Calculate the covariance between Stocks A and B. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.
- Consider of a portfolio consisting of 50% in Stock C and 50% in Stock D. Calculate the covariance between Stocks C and D. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.
| C) Portfolio AB | ||||||
| WA | WB | CovAB | CorrAB | E[RAB] | AB | |
| D) Portfolio CD | ||||||
| WC | WD | CovCD | CorrCD | E[RCD] | CD | |
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Essentials Of Corporate Finance
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan
9th International Edition
1259254801, 9781259254802
