The writer is very fast, professional and responded to the review request fast also. Thank you.
There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $65. The price of Stock A next year will be $53 if the economy is in a recession, $73 if the economy is normal, and $85 if the economy is expanding. The probabilities of recession, normal, and expansion are 0.2,0.6, and 0.2 respectively. Stock A pays no dividends and has a beta of 0.68. Stock B has an Expected return of 13%, a standard deviation of 34%, a beta of 0.45 and a correlation with stock A of 0.48. The market portfolio has a standard deviation of 14%. Assume the CAPM holds.
A. What are the expected return and standard Deviations of Stock A?
B. If you are a typical, risk-averse investor with a well diversified portfolio, which stock would you prefer and why?
C. What are the expected return and Standard deviations of a portfolio consisting of 60% stock A and 40% Stock B?
D. What is the beta of the portfolio in (c)?
Please show all work! It is important that i understand how to do this process.
a.State of Probability Return of A RA- E(RA) (RAE(RA))2 P(RA- E(RA))2 EconomyRecession0.2-0.105-0.1610.00259210.0051842Normal0.60.070.0140.0001960.0001176Expansion0.20.1750.119…
Show more
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more