Question
Use the following information for Stock K and Stock M to solve the following problems State of Economy Probability of state of the economy Rate
Use the following information for Stock K and Stock M to solve the following problems
| State of Economy | Probability of state of the economy | Rate of return if the state occurs | |
|---|---|---|---|
| Boom | .10 | Stock K: .25 | Stock M: .18 |
| Growth | .20 | .10 | .20 |
| Normal | .50 | .15 | .04 |
| Recession | .20 | -.12 | .00 |
What is the expected return for stock K? For stock M?
What is the variance for Stock K? For Stock M?
What is the standard deviation for Stock K? For Stock M?
An individual plans to invest $5,000: $3,000 in Stock K and $2,000 in Stock M. What are the portfolio weights for this portfolio?
Using the portfolio weights just computed, what is the expected return for the portfolio?
Given the weight, computer the variance and standard deviation of the portfolio?
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Principles Of Managerial Finance
Authors: Chad J. Zutter, Scott Smart
16th Edition
0136945880, 978-0136945888
