Variance and standard deviation for project alfa and beta

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1. Given the following information, what is the expected return and risk of an investment in the following shares?

ALFA:

Economic conditions probability return on investment

Strong growth 0,20 +45%

Weak growth 0,60 +20%

Economic decline 0,20 -5%

BETA:

Economic conditions probability return on investment

Strong growth 0,20 +10%

Weak growth 0,60 -10%

Economic decline 0,20 +10%

1. Calculate the expectation, variance and standard deviation for project Alfa and Beta.

2. Find the covariance and correlation between them

3. Let's assume that we can put Alfa and Beta together in a portfolio. Briefly comment on your assessment of the portfolio in terms of both expectations and volatility (standard deviation).

Reference no: EM132373354

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