he following table shows the returns of two types of investments, stocks (x) and bonds (y), under two different scenarios: boom and recession. The frequency f(∙) indicated the probability of boom and recession, and it is the same for any type of investment.Suppose you diversify your investments by splitting your funds half and half between stocks and bonds. That is, z = 1⁄2x + 1⁄2y. Find E(z) and the riskiness (standard deviation) of z. f(-) Stocks(x) Bonds(y) x-f(-) y-f(·) (x-x) (y-y)(x-x)2-f(-)(y-7)²-f(-)Recession 0.1-1022Вoom0.920

Answered: he following table shows the returns of…

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Author:Amos Gilat

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Chapter1: Starting With Matlab

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Problem 1P

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he following table shows the returns of two types of investments, stocks (x) and bonds (y), under two different scenarios: boom and recession. The frequency f(∙) indicated the probability of boom and recession, and it is the same for any type of investment.
1. Suppose you diversify your investments by splitting your funds half and half between stocks and bonds. That is, z = 1⁄2x + 1⁄2y. Find E(z) and the riskiness (standard deviation) of z.