Common stock of marielle machinery

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The common stock of Marielle Machinery will generate the following payoffs to investors next year:


Dividend

Stock Price

Boom

$8

$240

Normal

4

90

Recession

0

0

The common stock of Escapist Films will generate the following payoffs to investors next year:


Dividend

Stock Price

Boom

$0

$18

Normal

1

26

Recession

3

34

Marielle Machinery and Escapist Films stocks are selling today for $90 and $30 a share, respectively. Calculate the expected rate of return and standard deviation of returns for both companies. Then calculate the expected return and standard deviation of a portfolio half invested in Marielle Machinery and half invested in Escapist Films.

Reference no: EM131318054

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