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Calculate the expected return of the portfolio

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Reference no: EM133080444

Question - Consider the following information on two stocks:

 

P(State)

Stock A

Stock B

Boom

50%

0.25

0.15

Normal

20%

0.12

-0.06

Bust

30%

-0.05

0.10

Required -

1. Calculate the expected return for stock A.

2. Calculate the expected return for stock B.

3. Calculate the covariance(A,B).

4. Suppose you invest $50,000 into stock A, and $30,000 into stock B. Calculate the weight of A in the portfolio.

5. Suppose you invest $50,000 into stock A, and $30,000 into stock B. Calculate the expected return of the portfolio.

Reference no: EM133080444

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