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Calculate the Expected Return, Variance, and Standard Deviations for Investments

Question 102

Essay

Calculate the expected return, variance, and standard deviations for investments in either stock A or stock B, or an equally weighted portfolio of both.
 Scenario  Probability  Return an A  Return an B  Recession 25%4%9% Nonmal 40%8%4% Boom 35%20%4%\begin{array} { | l | c | c | c | } \hline { \text { Scenario } } & \text { Probability } & \text { Return an A } & \text { Return an B } \\\hline \text { Recession } & 25 \% & - 4 \% & 9 \% \\\hline \text { Nonmal } & 40 \% & 8 \% & 4 \% \\\hline \text { Boom } & 35 \% & 20 \% & - 4 \% \\\hline\end{array}

Correct Answer:

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Stock A:
Expected return = (.25 × -4%) +...

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