Question

hi i need help with this question but in details please how do i get each number??? i posted it before but the answers were not clear and when i tried to calculate it myself it resulted different

note: without using excel

3. (30 points) - Rate of returns for A and B companies in different states of nature are provided in the following table: State of nature Probability Rate of return on A's share (% Rate of return on B's share (%) 10 Weak Average Strong Very strong 0.3 0.5 0.1 0.1 a. Find the expected retum on companies Gamma and Theta shares. b. Calculate the standard deviation of retum for both shares. c. If an investor invests 80% in Gamma share and 20% in Theta share, find the expected retum and the standard deviation of return on this portfolio.

Answer 1

a. Return of stock A = 6.9%
Return of stock B= 4.7%

b. Standard deviation of stock A = 7.46%
STANDARD DEVIATION OF STOCK B = 3.41%

c. Expected return of the portfolio = 6.46%
Standard deviation of the portfolio = 6.49%

I have answer in as much detail as possible in the notes attached.  

I ® Ox Ox® P A B PXA PXB PCA-A) ² 0.3 - 4 2 0.3x-4 0.3x2 0.3(-4-6-902 0.5 10 4 0.5810 0.5x4 0.5 (10-6.9) ² 0-1 14 7 0.114 0. 17 0.1(14-6.982 ool 14 14 0.1817 0.114 0.1617-6-9) ² Total: Ã a 6.9% B = 4.7% 2 55-69%02 Return - Th= 7:46% P(B-B)2 P(A-A) (B-B) 0-3 (2-479 0-3(-4-6.9) (2-4-7) 0.5 (4- 4-7) 2 0.5 (10-6-9) (4-4-7) o.1 (7-4-7) 2 al (14-6.90 (4-4-7) 0.1 ( 14-4-72 o.1 (17-6:9) (14-4-7) Ty 2 11.61%2 Con (A,B) = 18.77% 2 " 3,41]. A e B >> Stended deviatris

e weight of A (WA) = 0.8 1 B(WB)- 0.2 Expected Retuen: WAX A+ WB & B 20.8*6.9+ 0-2x4.7 6.46% Standard deviation of portfolio (rp) WA2 TA ²+ WB² TB ² 4 2 WAWB CONCAIB) 5.8*55-69) + (0.2 x 1-61) + 2 (0.8x 0.2) x 18.77 Tp . 6.49%