Question
Will Power is forecasting risk and return for 2 stocks, Roll and Ross. He predicts that there is a 40% chance that the economy performs
Will Power is forecasting risk and return for 2 stocks, Roll and Ross. He predicts that there is a 40% chance that the economy performs poorly, and in that worst-case scenario, Roll will earn a -10% whereas Ross will earn a 21% for the month. He also predicts that there is a 60% chance that the economy will achieve great growth and in this best-case scenario, he expects that Roll will earn a 28% return while Ross will earn 8%.
Based on Wills estimation, calculate the risk and return AND interpret in plain English for a $100,000 portfolio, in which $35,000 invested in Roll and the rest of the investment invested in Ross.
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