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The stock of Foundations of Finance Inc. trades at $40 a share. Its end-of-year price and dividend will depend on the state of the economy
The stock of Foundations of Finance Inc. trades at $40 a share. Its end-of-year price and dividend will depend on the state of the economy by the end of the year as follows: Stock price $50 Dividend $2 Boom Normal economy Recession $43 $1 $34 $0.5 a. Calculate the expected holding-period return and standard deviation of the holding period return of Foundations of Finance Inc. Assume all three scenarios are equally likely. [1 point] b. Calculate the expected return and standard deviation of a portfolio invested half in Foundations of Finance Inc. and half in Treasury bills. Assume the return on Treasury bills is 4%. (1 point]
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