Question
The table below shows the expected rates of return for three stocks and their weights in some portfolio: Stock A Stock B Stock C Portfolio
The table below shows the expected rates of return for three stocks and their weights in some portfolio:
| Stock A | Stock B | Stock C | ||
|---|---|---|---|---|
| Portfolio weights | 0.4 | 0.2 | 0.4 | |
| State | Probability | Expected return: | Expected return: | Expected return: |
| Recession | 0.3 | 0 | 0.01 | -0.03 |
| Normal | 0.5 | 0.03 | 0.05 | 0.04 |
| Boom | 0.2 | 0.08 | 0.07 | 0.12 |
1. What is the expected portfolio return?
2. What is the standard deviation of the portfolio returns?
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Business Analysis And Valuation Using Financial Statements Text And Cases
Authors: Krishna G. Palepu, Paul M. Healy, Victor Lewis Bernard, W.Gordon Filby
2nd Edition
0324015658, 9780324015652
