QUESTION 2 The probability distributions of returns for Stock A and Stock B are given below: State of Economy Probabilit
Posted: Thu May 26, 2022 7:04 am
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.
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.