Question
You have a portfolio worth $50,000 consisting of two stocks, A and B. You invested $20,000 in stock A. Consider the following information: State of
You have a portfolio worth $50,000 consisting of two stocks, A and B. You invested $20,000 in stock A. Consider the following information:
| State of economy | Probability | Return on A | Return on B |
| Growth | .30 | 10% | 20% |
| Normal | .5 | 15% | 4% |
| Recession | .2 | -12% | 0% |
a) What is the expected return for A? for B?
b) What is the standard deviation for A? for B?
c) What is the expected return and standard deviation for the portfolio?
d) What is the correlation between A and B? are there benefits to forming a portfolio of these two securities?
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Carbon Markets Or Climate Finance?
Authors: Axel Michaelowa
1st Edition
0415743435, 978-0415743433
