QUESTION 2 The probability distributions of returns for Stock A and Stock B are given below: State of Economy Probabilit

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QUESTION 2
The probability distributions of returns for Stock A and Stock B
are given below:
State of Economy
Probability
Stock A
Stock B
Bull
0.3
20%
5%
Bear
0.7
12%
10%
REQUIRED
a. Calculate the expected returns for Stock A and Stock
B.
b. Calculate the variances of returns for Stock A and Stock
B.
c. Calculate the correlation of Stock A with Stock B.
d. Based on the correlation obtained in part (c), calculate the
expected return and standard deviation of the minimum variance
portfolio.