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You have estimated the returns of 2 companies for the next year depending on the general economic condition. (a) Calculate the expected return and standard
You have estimated the returns of 2 companies for the next year depending on the general economic condition. (a) Calculate the expected return and standard deviation of the returns of each company. (b) Calculate the covariance and correlation between the returns of these 2 companies. (c) Let's combine these 2 companies 50%50% in portfolio P. Calculate the expected return and the standard deviation of the portfolio P. (d) Using mean-variance criterion, does any of the 3 investments, company 1, company 2, and portfolio P, dominate the other one
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