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Calculate the expected return of the portfolio

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Reference no: EM132798234

You are considering constructing a portfolio of two assets - Blue Ltd shares and Green Ltd shares. You want to invest $5,250 in Blue Ltd shares and $9,750 in Green Ltd shares. Due to the uncertainty facing the investment environment in 2021, you decide there is a 35% possibility of recession, 15% possibility of growth, or 50% possibility of economic stability. You believe under these states Blue Ltd and Green Ltd shares will provide the following returns:

State          Blue Ltd Return       Green Ltd Return

Growth             35%                        22%

Stable              10%                         15%

Recession        -22%                          7%

a. Calculate the expected return of the portfolio consisting of Blue Ltd and Green Ltd shares. (Show answer as a percentage correct to 2 decimal places.)

b. Calculate the standard deviation of the portfolio consisting of Blue Ltd and Green Ltd shares. (Show answer as a percentage correct to 4 decimal places.)

Reference no: EM132798234

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