Question

Use the following scenario analysis for stocks X and Y to answer the questions.

	Bear	Normal	Bull
	Market	Market	Market
Probability	15.00%	50.00%	35.00%
Stock X	-13.00%	11.00%	28.00%
Stock Y	-26.00%	16.00%	46.00%

What is the standard deviation of return for stock X?

Assume you have a $200,000 portfolio and you invest $80,000 in stock X and the remainder in stock Y. What is the expected return for this portfolio? Enter your answer rounded to two decimal places.

Answer 1

X E33 - : Дв с =B33-$D$37 E F G Probability 32 Return (r) [(P(r)] 33 -13.00% 0.15 34 11.00% 0.50 35 28.00% 0.35 36 37 Expected return (u) 38 fix D Expected return [rxP(r)=u] -1.95% 5.50% 9.80% r-u -26.35% -2.35% 14.65% (r-u)^2 0.0694 0.0006 0.0215 P(r)x(r-u)^2 1.04% 0.03% 0.75% 13.35% 1.82% Variance (o^2) Standard deviation (0) 39 13.49%

| State of Rate of returns if economy state occurs Stock X Stock Y Bear -13% -26% Normal 11% 16% Bull 28% 46% Weighted returns if Expected state occurs portfolio Probability Expecte return (Weightx Return)| return (r) / [(P(r)] [rxP(r)= ul Stock X Stock Y -5.20% -15.60% -20.80% 0.15 -3.12% 4.40% 9.60% 14.00% 0.50 7.00% 11.20% 27.60% 38.80% 0.35 13.58% Weights 40% 60% Portfolio Expected return (u) 17.46%

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