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Using the probability distribution shown below, calculate the expected risk and return estimates of each stock and of a portfolio comprised of 40% of Stock
Using the probability distribution shown below, calculate the expected risk and return estimates of each stock and of a portfolio comprised of 40% of Stock A and 60% of Stock B.
State of Economy | Probability of State Occurring | Stock A's Conditional Return | Stock B's Conditional Return |
Recession | 0.3 | -12% | 20% |
Normal | 0.5 | 14% | 12% |
Boom | 0.2 | 25% | -10% |
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