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How do calculate the return and standard deviation

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The following table provides the share return forecasts and associated probabilities for X Coy. and Y Coy. Answer parts 'a' to 'c' using the information provided. Detailed worked solutions must be presented in your answers, including formulae used, progressive and final answers to the questions.

X Coy.                17.0                       10.0

Y Coy.                60                          20

Return (%)           20.0                      10.0

Probability (%)       30                        20

Return (%)          12.0                       8.0

Probability (%)     20                         50

Question (a) Calculate the expected return on each share.

Question (b) Calculate the variance and standard deviation for each share.

Question (c) Suppose a portfolio comprised of 70% investment in X Coy. and 30% investment in Y Coy. can be constructed. An analyst has estimated that the correlation coefficient of the two-asset portfolio is -0.30, calculate the return and standard deviation of this portfolio. Compare your answer with those reported in parts a. and b. and draw your conclusion.

Reference no: EM132611826

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