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Business, 16.06.2020 22:57 kaylienguyen

One share of stock Z is selling for $10. The stock has the following possible payoffs after one year:Slump Normal Boom$8 $12 $16Assume equal probability for each state of the economy.1) Calculate the expected return and the variance for return.2) Suppose the risk free rate is 4%, and that stock Z is on the CML. Calculate the sharpe ratio for Z3) Suppose stock Y has an expected return of 25% and variance of 0.16. Returns for Y and Z have a correlation coefficient of 0.1. Calculate the return and variance for a portfolio with 30% in Y and 70% in Z.

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