QUESTION 2 The probability distributions of returns for Stock A and Stock B are...
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Accounting
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. [5 marks]
b. Calculate the variances of returns for Stock A and Stock B. [5 marks]
c. Calculate the correlation of Stock A with Stock B. [5 marks]
d. Based on the correlation obtained in part (c), calculate the expected return and standard deviation of the minimum variance portfolio.
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