2023 Q1Based on the following information State of Economy Probability of State of Economy Rate of Return

Q1Based on the following information:

State of Economy

Probability of 
State of Economy

Rate of Return
if State Occurs

  Depression

.12

−.103

  Recession

.23

.061

  Normal

.47

.132

  Boom

.18

.213

Calculate the expected return. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  Expected return

[removed]  %

Calculate the standard deviation. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  Standard deviation

[removed]  %

Q2.Consider the following information:

Rate of Return if State Occurs

  State of

Probability of

  Economy

State of Economy

Stock A

Stock B

Stock C

  Boom

.15

.37

.47

.27

  Good

.45

.22

.18

.11

  Poor

.35

−

.04

−

.07

−

.05

  Bust

.05

−

.18

−

.22

−

.08

a.

Your portfolio is invested 20 percent each in A and C, and 60 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

  Expected return

[removed] %  

b–1.

What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161))

  Variance

[removed]  

b–2.

What is the standard deviation? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

  Standard deviation

[removed] %  

Q4. Based on the following information:

  State of
 Economy

Return on
Stock A

Return on
Stock B

  Bear

.107

−.050

  Normal

.110

.153

  Bull

.078

.238

Assume each state of the economy is equally likely to happen.

Calculate the expected return of each of the following stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Expected return  

  Stock A

[removed]%

  Stock B

[removed]%

Calculate the standard deviation of each of the following stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Standard deviation  

  Stock A

[removed]%

  Stock B

[removed]%

What is the covariance between the returns of the two stocks? (Negative amount should be indicated by a minus sign, Do not round intermediate calculation and round your final answer to 6 decimal places. (e.g., 32.161616))

  Covariance

[removed]  

What is the correlation between the returns of the two stocks? (Negative amount should be indicated by a minus sign, Do not round intermediate calculation round your final answer to 4 decimal places. (e.g., 32.1616))

  Correlation

[removed]