Question

i know this question is posted, but can the work be explained please, so step by step.

What is the standard deviation of the returns on a portfolio that is invested 52 percent in stock Q and 48 percent in stock R? Probability of State of Economy 10% 90% Returns if State Occurs Stock Q Stock R 14% 16% 8% 11% State of Economy Boom Normal 1.66 percent 2.47 percent 2.63 percent 3.28 percent 3.41 percent

Answer 1

Expected Return in boom =52%*14%+48%*16% =14.96%
Expected Return in Normal =52%*8%+48%*11% =9.44%

Expected return =10%*14.96%+90%*9.44% =9.992%
Standard Deviation =(10%*(14.96%-9.992%)^2+90%*(9.44%-9.992%)^2)^0.5 =1.66% (Option a is correct option)