Question
Use the following scenario analysis for stocks X and Y to answer the questions. Bear Normal Bull Market Market Market Probability 25.00% 45.00% 30.00% Stock
Use the following scenario analysis for stocks X and Y to answer the questions.
| Bear | Normal | Bull | |
| Market | Market | Market | |
| Probability | 25.00% | 45.00% | 30.00% |
| Stock X | -40.00% | 13.00% | 55.00% |
| Stock Y | -22.00% | 8.00% | 29.00% |
Assume you have a $200,000 portfolio and you invest $80,000 in stock X and the remainder in stock Y. If the riskfree rate of return is 3.75%, and we assume that the standard deviation of the excess returns on the portfolio is 15%, what is the Sharpe Ratio for this portfolio formed from stocks X and Y?
b) What is the expected rate of return for stock Y?
Enter your answer rounded to two decimal places. For example, if your answer is 123.45% or 1.2345 then enter as 1.23 in the answer box.
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The Changing Geography Of Banking And Finance
Authors: Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro
1st Edition
1441947205, 978-1441947208
