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Business, 12.02.2021 07:10 abbie722

The following represents the probability distribution of future returns for stock A and stock B. State of Economy Probability Return on Security A Return on Security B state 1 0.35 1% 22% state 2 0.30 6% 20% state 3 0.10 9% 18% state 4 0.25 15% −4% (Each of parts a-d is worth 2 pts.; part e is worth 3 pts.) a. What are the expected returns on securities A and B? b. What is the standard deviation of the returns for each of the securities? c. Consider a portfolio consisting of 60% investment in security A and 40% in security B. According to the forecasted returns, what will be the portfolio’s return if the "state 1" economy emerges? d. Continuing with the same portfolio, what is the expected return on a portfolio consisting of 60% investment

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