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The probability distribution of returns for Stock A and Stock B are stated as follows: Probability 0.2 Stock A 12% Stock B 14% 0.5

 



The probability distribution of returns for Stock A and Stock B are stated as follows: Probability 0.2 Stock A 12% Stock B 14% 0.5 17% 15% 0.3 16% 19% (a) Calculate the expected return of Stock A and Stock B. (4 marks) (b) Compute the standard deviation of Stock A and Stock B. (7 marks) (c) Determine the covariance between Stock A and Stock B. (4 marks) (d) Identify is the correlation coefficient between Stock A and Stock B. (1 mark) (e) Samuel, an ordinary person retired recently and intends to invest his retirement funds in Stock A and Stock B. Samuel invests $115,000 of his money in Stock A and $125,000 in Stock B. Calculate the expected return of this portfolio. (f) Calculate the standard deviation of this portfolio. (4 marks) (5 marks)

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