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Compute expected returns and standard deviation of portfolio

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Reference no: EM132601907

Assume that there are two assets and three state of economy as follow

                  State Of Economy              Probability Of State Of Economy

Rate Of Return If State Occurs   Asset A              Asset B

Recession                     0.20           -0.15             0.20

Normal                         0.50             0.20            0.30

Boom                        0.30                    0.60              0.40

Assume further that Br. 15,000 invested in asset A and Br. 5,000 invested in asset B. Based on this information, answer the following questions.

Question a) Compute expected returns and standard deviation of the portfolio

Question b) Compute covariance of the assets (Cov AB )

Question c) If the assets are mutually exclusive, which asset you prefer? Why

Reference no: EM132601907

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