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The following data are available about the returns of two stocks and market portfolio: Economic State Probability Stock A (%) Stock B (%) Market portfolio (%) Deep Recession 0.05 -3 -2 -13 Mild Recession 0.20 6 9 1 Average 0.50 11 12 15 Mild Boom 0.20 14 15 29 Strong Boom 0.05 19 26 43 Table 1

The following data are available about the returns of two stocks and market portfolio: Economic State Probability Stock A (%) Stock B (%) Market portfolio (%) Deep Recession 0.05 -3 -2 -13 Mild Recession 0.20 6 9 1 Average 0.50 11 12 15 Mild Boom 0.20 14 15 29 Strong Boom 0.05 19 26 43 Table 1

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a) Compute the expected return for stocks A and B 
b) Compute the standard deviation for stocks A and B. Which stock 
is riskier?
c) Compute the expected return of a portfolio that comprises of 70% 
stock A and 30% stock B 
d) Compute the standard deviation of returns for the market 
portfolio 
e) Which, among stocks A, B and the market is riskier? Respond in 
light of your computations

The following data are available about the returns of two stocks and market portfolio: Economic State Probability Stock A (%) Stock B (%) Market portfolio (%) Deep Recession 0.05 -3 -2 -13 Mild Recession 0.20 6 9 1 Average 0.50 11 12 15 Mild Boom 0.20 14 15 29 Strong Boom 0.05 19 26 43 Table 1
Transcribed Image Text:The following data are available about the returns of two stocks and market portfolio: Economic State Probability Stock A (%) Stock B (%) Market portfolio (%) Deep Recession 0.05 -3 -2 -13 Mild Recession 0.20 6 9 1 Average 0.50 11 12 15 Mild Boom 0.20 14 15 29 Strong Boom 0.05 19 26 43 Table 1
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