Two stocks have the following possible outcomes: Outcome 1 234 5 Probability Stock W .10 .20...
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Two stocks have the following possible outcomes: Outcome 1 234 5 Probability Stock W .10 .20 .40 .20 .10 e. +2% +18% +9% -12% +8% Stock X +25% +10% +14% +3% -10% a. What is the expected return for each stock? b. What is the standard deviation for each stock? c. 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. Two stocks have the following possible outcomes: Outcome 1 234 5 Probability Stock W .10 .20 .40 .20 .10 e. +2% +18% +9% -12% +8% Stock X +25% +10% +14% +3% -10% a. What is the expected return for each stock? b. What is the standard deviation for each stock? c. 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.
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SOLUTION a Expected Return Stock W Expected Return 010 x 20 018 x 10 008 x 10 004 x 20 003 x 10 22 1... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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