Question

State of Economy Probability of State of Economy Return of Stock A if State Occurs Return of Stock B if State Occurs

Recession 0.30 -0.10 0.08

Normal ? 0.20 0.15

Boom 0.20 0.30 0.20

1) Suppose you have $50,000 total. If you put $30,000 in Stock A and the remainder in Stock B, what are the portfolio returns in each state?

2) Suppose you have $50,000 total. If you put $30,000 in Stock A and the remainder in Stock B, what will be the expected return of your portfolio?

3) Suppose you have $50,000 total. If you put $30,000 in Stock A and the remainder in Stock B, what will be the standard deviation of your portfolio?

Answer #1

There are two assets and three states of the economy, answer
questions 32 to 34.
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.10
0.08
Normal
?
0.20
0.15
Boom
0.20
0.30
0.20
Suppose you have $50,000 total. If you put $30,000 in Stock A
and the remainder in Stock B, what are the portfolio returns in
each state?
Suppose you have $50,000 total....

There are two assets and three states of the economy, answer
questions 11 to 15.
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.20
0.10
Normal
?
0.30
0.20
Boom
0.15
0.40
0.30
What is the expected return for Stock A?
What is the standard deviation for Stock A?
Suppose you have $50,000 total. If you put $20,000 in Stock A
and the remainder...

There are two assets and three states of the economy, answer
questions 11 to 15.
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.20
0.10
Normal
?
0.30
0.20
Boom
0.15
0.40
0.30
What is the expected return for Stock A?
What is the standard deviation for Stock A?
Suppose you have $50,000 total. If you put $20,000 in Stock A
and the remainder...

Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Recession
0.10
0.06
-0.18
Normal
0.60
0.08
0.16
Boom
0.30
0.16
0.35
Required:
Given that the expected return for Stock A is 10.200%, calculate
the standard deviation for Stock A. (Do not round your
intermediate calculations.)

Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Recession
0.10
0.03
-0.21
Normal
0.60
0.08
0.15
Boom
0.30
0.13
0.32
Required:
(a)
Calculate the expected return for Stock A. (Do not round
your intermediate calculations.)
(b)
Calculate the expected return for Stock B. (Do not round
your intermediate calculations.)
(c)
Calculate the standard deviation for Stock A. (Do not
round your intermediate...

Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Recession
0.20
0.03
-0.19
Normal
0.60
0.08
0.14
Boom
0.20
0.15
0.35
Required:
(a)
Calculate the expected return for Stock A. (Do not round
your intermediate calculations.)
8.40%
8.19%
10.07%
10.37%
7.49%
(b)
Calculate the expected return for Stock B. (Do not round
your intermediate calculations.)
11.60%
10.00%
13.18%
11.02%
12.06%
(c)
Calculate the standard deviation for Stock...

Rate of Return if State Occurs
State of Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
0.30
50.0%
12.0%
20.0%
Average
0.45
15.0%
-5.0%
6.0%
Recession
0.25
-8.0%
2.0%
-3.2%
Your portfolio manager has invested 30% of your money in Stock
A, 50% in Stock B, and the rest in Stock C.
1. What is the correlation coefficient between Stocks B and
C?
2. What is the standard deviation of your portfolio?
Hint: Instead of...

Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Stock C
Boom
0.20
0.20
0.33
0.29
Good
0.30
0.15
0.12
0.13
Poor
0.20
0.01
–0.09
–0.06
Bust
0.30
–0.21
–0.26
–0.13
a. Your portfolio is invested 30 percent each
in A and C and 40 percent in B. What is the expected return of the
portfolio? (Do not round intermediate calculations. Enter
your answer as a percent...

Consider the following information: Rate of Return if State
Occurs State of Economy Probability of State of Economy Stock A
Stock B Recession 0.20 0.02 -0.17 Normal 0.60 0.08 0.12 Boom 0.20
0.16 0.35 Required: Given that the expected return for Stock A is
8.400%, calculate the standard deviation for Stock A. (Do not round
your intermediate calculations.)

Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Stock C
Boom
0.10
0.18
0.48
0.33
Good
0.30
0.11
0.18
0.15
Poor
0.40
0.05
?0.09
?0.05
Bust
0.20
?0.03
?0.32
?0.09
a. Your portfolio is invested 25 percent each
in A and C and 50 percent in B. What is the expected return of the
portfolio? (Do not round intermediate calculations. Enter
your answer as a percent...

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