Rube Bressler owns three stocks and has estimated the following joint proba- bility distribution of returns: Outcome 1 3 Stock A -10 0 10 20 Stock B 10 10 5 <-10 Stock C 0 10 15 Probability .30 .20 .30 20 Calculate the portfolio's expected return and standard deviation if Rube invests 20% in stock A, 50% in stock B, and 30% in stock C. Assume that each security's return is completely uncorrelated with the returns of the other securities.
Rube Bressler owns three stocks and has estimated the following joint proba- bility distribution of returns: Outcome 1 3 Stock A -10 0 10 20 Stock B 10 10 5 <-10 Stock C 0 10 15 Probability .30 .20 .30 20 Calculate the portfolio's expected return and standard deviation if Rube invests 20% in stock A, 50% in stock B, and 30% in stock C. Assume that each security's return is completely uncorrelated with the returns of the other securities.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio
Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
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