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Two stocks have the following possible outcomes: Outcome 1 2 3 4 5 Probability .10 .20 .40 .20 Stock W Stock X +2% +25% +18%

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Two stocks have the following possible outcomes: Outcome 1 2 3 4 5 Probability .10 .20 .40 .20 Stock W Stock X +2% +25% +18% +10% +9% +14% -12% +3% +8% -10% .10 a. c. What is the expected return for each stock? b. What is the standard deviation for each stock? What is the correlation between the stocks? d. If you hold a portfolio of the stocks that is weighted 60% W, and 40% X, what is the expected return and standard deviation for the portfolio? Assume that Stock X is actually the Market Portfolio. Calculate the Beta for Stock W. e

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