What are the expected return and standard deviation

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Reference no: EM13259984

Let's say that there are 2 securities we are considering for purchase. Here are their returns:

Expectation for Return	Probability of Outcome	Return on Security A	Return on Security B
Optimistic	.15	.25	.10
Slightly positive	.35	.20	.15
Slightly negative	.35	.15	.20
Pessimistic	.15	.10	.25

a) What are the expected return and standard deviation of each security?

b) What are the expected return and standard deviation of a portfolio with half of its funds invested in each of these securities?

c) How does this explain diversification?

Reference no: EM13259984

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