Reference no: EM133436535
You are asked to evaluate a portfolio of five stocks. Stock A will receive an allocation of 38%, is expected to get a return of -20% in recession, normally get 19%, and 25% during a boom. Stock B will receive an allocation of 20.25%, is expected to get a return of 18% in recession, normally get 11%, and -6% in a boom. Stock C will receive an allocation of 18.5%, is expected to get a return of 3% in recession, normally get 8%, and 11% in a boom. Stock D will receive an allocation of 9% in recession, normally get 4%, and 2% during a boom. Stock E will receive the balance of the allocation, is expected to get a return of 8% during recession, 7% normally, and 6% during a boom.
1. What is the expected return of the portfolio? Please provide your answer as a decimal.
2. Given the information in Pt 1, what is the variance of the portfolio?
3. Given the information in Pt 1, what is the standard deviation of the portfolio?
4. Would you recommend this portfolio? Why or why not?