Group Assignment 1. Consider the following information about returns of two stocks: State Probability Stock A Stock B Bo

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Group Assignment 1. Consider the following information about returns of two stocks: State Probability Stock A Stock B Bo

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Group Assignment 1 Consider The Following Information About Returns Of Two Stocks State Probability Stock A Stock B Bo 1
Group Assignment 1 Consider The Following Information About Returns Of Two Stocks State Probability Stock A Stock B Bo 1 (44.17 KiB) Viewed 53 times
Group Assignment 1. Consider the following information about returns of two stocks: State Probability Stock A Stock B Boom 0.3 25.00% -2.50% Good 0.4 15.00% 5.00% Level 0.2 10.00% 10.00% Slump 0.1 -5.00% 15.00% a. What are the expected return and standard deviation of stock A and stock B? (10 marks) b. If you invest 50% of your money in stock A and 50% of your money in stock B, what are the portfolio's expected return and standard deviation (Hint: Considering the four states of the economy)? (10 marks) c. Use the results of a-b to explain the benefit of diversification. (5 marks) (Underline your final figures for parts (a) and (b), e.g., Ans.: XXXX)
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