PROBLEM 6 State Probability Stock As return Stock Bs return Boom 0.1 15% 11% Normal...
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PROBLEM 6 State Probability Stock As return Stock Bs return Boom 0.1 15% 11% Normal 0.8 10% 8% Recession 0.1 20% 3% a. Referring to Table above, compute the expected rate of return for Stock B. State your answer as a percentage with four digits after the decimal point. Denote negative returns with - sign. (ANSWER 7.8000%) b. Referring to Table above, compute the standard deviation of return for Stock A. State your answer as a percentage with four digits after the decimal point. (ANSWER 3.2016%) c. Referring to Table above, compute the correlation coefficient between the returns of the two assets. State your answer with six digits after the decimal point. Use - to denote negative correlation. (ANSWER -0.545279) d. Referring to Table above, compute the expected return of a portfolio with 30% in Stock A and 70% in Stock B. State your answer as a percentage with four digits after the decimal point. Denote negative returns with - sign. (ANSWER 8.9100%) e. Referring to Table above, compute the standard deviation of the return of a portfolio with 30% in Stock A and 70% in Stock B. State your answer as a percentage with four digits after the decimal point. (ANSWER 1.1068%)
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