Calculate the expected return, variance, and standard deviations for investments

Question

Calculate the expected return, variance, and standard deviations for investments in stock A, stock B, and an equally weighted portfolio of both.

Scenario

Probability

Return on A

Return on B

Recession

25%

-4%

9%

Normal

40%

8%

4%

Boom

35%

20%

-4%

  

Scenario

     

Probability

     

Return on A

     

Return on B

     

Recession

     

25%

     

-4%

     

9%

     

Normal

     

40%

     

8%

     

4%

     

Boom

     

35%

     

20%

     

-4%

   Calculate the expected return, variance, and standard deviations for investments in stock A, stock B, and an equally weighted portfolio of both.

Explanation / Answer

Answer:

            Stock A:

Expected return = (.25 x

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