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szehim2009 szehim2009
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A month ago
After you have done an extensive analysis of the economy, Stock X, and Stock Y, you make the following forecasts:

State of
Economy
Probability of
Occurrence
Stock X
Expected Return
Stock Y
Expected Return
Boom30%20%-12%
Normal45%12%20%
Bust25%-8%30%

Suppose you plan to invest in a portfolio with 40% of the funds in Stock X and 60% in Stock Y. The market return is 12% with a standard deviation of 16%. The risk-free rate is 5%.
a) What are the expected returns of Stock X and Stock Y?
b) What are the standard deviation of the returns of Stock X and Stock Y?
c) What is the covariance of the returns on Stock X and Stock Y?
d) What is the correlation between Stock X and Stock Y?
e) What is the expected return on the portfolio?
f) What is the standard deviation of the portfolio?
g) What is the Sharpe ratio of the portfolio?
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
Author:
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ssong07ssong07
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A month ago
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szehim2009 Author
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A month ago
You make an excellent tutor!
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Yesterday
Thank you, thank you, thank you!
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2 hours ago
Just got PERFECT on my quiz
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