Business, 11.05.2021 21:00 Lunablum

There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $85. The price of Stock A next year will be $74 if the economy is in a recession, $97 if the economy is normal, and $107 if the economy is expanding. The probabilities of recession, normal times, and expansion are .30, .50, and .20, respectively. Stock A pays no dividends and has a correlation of .80 with the market portfolio. Stock B has an expected return of 15.0 percent, a standard deviation of 35.0 percent, a correlation with the market portfolio of .34, and a correlation with Stock A of .46. The market portfolio has a standard deviation of 19.0 percent. Assume the CAPM holds. 1. What is the vañiance of Stock A? (Do not round intermediate c culations and round your answer to 4 decimal places, e. g. 32.1616.)
2. What is the standard deviation of Stock A?

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There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $85. The pric...

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