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You're also trying to calculate the expected return, risk premium, variance, and standard deviation of stock ABC. You believe that ABC has a 10% chance
You're also trying to calculate the expected return, risk premium, variance, and standard deviation of stock ABC. You believe that ABC has a 10% chance of great performance over the next year, in which case it will generate a 50% stock return. You believe that there is a 60% chance that ABC will have good performance, and generate a return of 15%. You believe there is a 30% chance that ABC will have poor performance, and generate a negative return = -15%. The risk free rate is 5%. What are the expected return, risk premium, variance, and standard deviation of returns for ABC? If we purchased a portfolio by purchasing $300 of XYZ stock and $1200 of ABC stock, what would be the portfolio's expected return, variance, and standard deviation if the two stocks have a correlation of 0.30
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