Probability of the state of economy Rate of return if state occurs Stokk SSS Recession 0.4...
| Probability of the state of economy |
Rate of return if state occurs Stokk SSS |
|
| Recession | 0.4 | 4% |
| Boom | 0.6 | 18% |
Consider following information.
a) Calculate the expected return of a stock.
b) Calculate the standard deviation of a stock return.
c) If the risk-free rate is 2% what is the expected portfolio return invested 75% in stock SSS and 25% in risk-free asset?
d) Discuss what do we mean by systematic and unsystematic risk. What is the effect of diversification?
Homework Answers
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Probability of the state of economy
Rate of return if state occurs
Stokk SSS
Recession
0.4...
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