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Question 7 (15 pts): retums for There are three states of economy and you are given the following probabilities and each stock for each state of economy. You invest 30% in stock X and 70% in stock Y. The betas for cach stock are also given below Returns if State Oceurs State of Economy Probability of State of Economy 20% 50% 30% Stock AStock B Boom Normal Recession i 5% 10% 5% 40% 12% Beta 0.95 1.65 Stock Portfolio Weights 30% 70% a. (4 pts) Calculate the expected return of the portfolio

b) calculate the standard deviation of the portfolio.

c) calculate the beta of the portfolio.

d) is the systematic risk of the portfolio is more or less than the market?

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mputation of Expected Retuans ot the postfoio State paob Retuan Mean | Retuan Mean 3 4 O 6 12- IO 5 4O (12 0.3 | -5% | c, 5) |-40 | (12) Estimoted Retusans 6.5 2- ) Standavd deuiation of -the postf oli o. LOALOB 6月 Standared deviation of a 7225 2 14 45 12.25 0S 6 12s 132 25 0.3 3.675 8.5 15 t O 3.5 5 60.2SegutsL 213 2 54.225 318 28 8.544 22 848 (C) Beta of Portfolio B 165 ニ0.285 1.155 Systematic eisk nothivg Bur peta of pourbo i

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