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Risk Reduction in Portfolios You are given the following distributions of returns for assets (single stock...

Risk Reduction in Portfolios

You are given the following distributions of returns for assets (single stock or portfolio) A, B, and C.

Economic                                                                    Return on Asset

Conditions                  Probability                               A         B         C

Boom                              .30                                       60%     50%     10%

Normal                            .40                                       40        30        50

Bust                                 .30                                       20        10        90

Find the expected return and standard deviation of B and C. (A’s expected return is 40% and its standard deviation is 15.49%)

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