1. Consider the following states of outcomes, probabilities, and expected returns on only stocks three stocks in your portfolio; X, Y, and Z. State Probability X Y Boom 0.15 16% 10% 22% Semi-Boom ?? 14% 8% 18% Normal 0.50 10% 6% 14% Mild-Recession 0.10 5% 4% -10% Full-Recession 0.10 -3% 2% -12% a. What is the expected return of the portfolio if $25,000 is invested in X, $35,000 in Y, and $30,000 invested in stock Z? b. What are the standard deviations of stocks X, Y, and Z?
1. Consider the following states of outcomes, probabilities, and expected returns on only stocks three stocks in your portfolio; X, Y, and Z. State Probability X Y Boom 0.15 16% 10% 22% Semi-Boom ?? 14% 8% 18% Normal 0.50 10% 6% 14% Mild-Recession 0.10 5% 4% -10% Full-Recession 0.10 -3% 2% -12% a. What is the expected return of the portfolio if $25,000 is invested in X, $35,000 in Y, and $30,000 invested in stock Z? b. What are the standard deviations of stocks X, Y, and Z?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1. Consider the following states of outcomes,
probabilities, and expected returns on only stocks
three stocks in your portfolio; X, Y, and Z.
State
Probability X
Y
Boom
0.15
16%
10%
22%
Semi-Boom
??
14%
8%
18%
Normal
0.50
10%
6%
14%
Mild-Recession
0.10
5%
4%
-10%
Full-Recession
0.10
-3%
2%
-12%
a. What is the expected return of the portfolio if $25,000
is invested in X, $35,000 in Y, and $30,000 invested in
stock Z?
b. What are the standard deviations of stocks X, Y, and Z?
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