Question

Consider the following scenario analysis and answer the following 3 questions:

Economy	Probability	Return on Stock A	Return on Stock B
Good	20%	20%	30%
Normal	50%	15%	10%
Bad	30%	10%	5%

14. What are the expected return and standard deviation of stock A?

      A) 13.5% and 5.3%

      B) 14.5% and 4.0%

      C) 14.5% and 5.3%

      D) 14.5% and 3.5%

15. What are the expected return and standard deviation of stock B?

      A) 17% and 8.2%

      B) 17% and 6.5%

      C) 12.5% and 9.0%

      D) 12.5% and 3.1%

16.       What’s the correlation coefficient between the two stocks?

      A) 0.8

      B) -0.8

      C) -0.9

      D) 0.9

Answer 1