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Calculate the covariance between the abc and xyz stocks

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Reference no: EM132606235

Northway company ltd has equally invested in two different stocks; ABC and XYZ. We anticipate that there is a 15% chance that next year's stock returns for ABC Corp will be 6%, a 60% probability that they will be 8% and a 25% probability that they will be 10%. In addition, we already know the expected value of returns is 8.2%, and the standard deviation is 1.249%.

We also anticipate that the same probabilities and states are associated with a 4% return for XYZ Corp, a 5% return, and a 5.5% return. The expected value of returns is then 4.975 and the standard deviation is 0.46%.

Required.

Question 1) Calculate the expected return of the Portfolio of asset of Northway ltd.

Question 2) Calculate the Covariance between the ABC and XYZ stocks.

Question 3) Calculate the Standard deviation of the Portfolio.

Reference no: EM132606235

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