1. Consider following information:
Probability of the state of economy 
Rate of return if state occurs 

Stock SSS 

Recession 
0.1 
4 % 
Normal 
0.5 
10 % 
Boom 
0.4 
12.1 % 
Calculate the expected return of a stock. Express your answer as
%.
2. Consider the same info as before:
Probability of the state of economy 
Rate of return if state occurs 

Stock SSS 

Recession 
0.1 
4 % 
Normal 
0.5 
10 % 
Boom 
0.4 
12.1 % 
Calculate the standard deviation of a stock return. Express your answer as %.
3. Refer back to previous questions. If you are holding a portfolio invested 60% in stock SSS and 40% in market portfolio and the expected return of this portfolio is 10%. What must be the rate of return on market portfolio? Express you answer as a %.
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