Use the following scenario analysis for Stocks X and Y to answer the questions below (round to the nearest percent). Bear Market Normal Market Bull Market Probability 0.2 0.5 0.3 Stock X -20% 18% 50% Stock Y -15% 20% 10% 1) What are the expected rates of return for Stocks X and Y? 2) What are the standard deviations of returns on Stocks X and Y? 3) Assume that of your $10,000 portfolio, you invest $9,000 in Stock X and $1,000 in Stock Y. What is the expected return on your portfolio?
Use the following scenario analysis for Stocks X and Y to answer the questions below (round to the nearest percent). Bear Market Normal Market Bull Market Probability 0.2 0.5 0.3 Stock X -20% 18% 50% Stock Y -15% 20% 10% 1) What are the expected rates of return for Stocks X and Y? 2) What are the standard deviations of returns on Stocks X and Y? 3) Assume that of your $10,000 portfolio, you invest $9,000 in Stock X and $1,000 in Stock Y. What is the expected return on your portfolio?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 1P
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Use the following scenario analysis for Stocks X and Y to answer the questions below (round to the nearest percent).
Bear Market |
Normal Market |
Bull Market |
|
Probability |
0.2 |
0.5 |
0.3 |
Stock X |
-20% |
18% |
50% |
Stock Y |
-15% |
20% |
10% |
1) What are the expected
2) What are the standard deviations of returns on Stocks X and Y?
3) Assume that of your $10,000 portfolio, you invest $9,000 in Stock X and $1,000 in Stock Y. What is the expected return on your portfolio?
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Isn't the 0.0592 in part 2 the variance? By squaring that you should get 24%?
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