In: Finance
Assume you have invested $55,000 in the stock of ABC Industries and $20,000 in the stock of Southern Enterprises. Their prospective returns are listed below:
State of the Economy |
Probability |
ABC Industries |
Southern Enterprises |
Expansion |
25% |
30% |
25% |
Normal |
50% |
21% |
15% |
Recession |
25% |
2% |
-4% |
Solution :- (C)
Variance of Portfolio =
= (0.733*10.21)2 + (0.267*10.50)2 + 2*0.733*0.267*10.21*10.50*1
= 105.83
Std deviation = (105.83)1/2 = 10.29%
(D) Correlation between there two stock is Positive and that is Positive 1.
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