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    Mohamed Gamal
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    You have $200,000 saved for retirement split evenly between two stocks, X and Y. The expected returns and risks of each stock is provided under different economic states. You must calculate: 1) the expected return of each stock, 2) the risk of each stock, 3) the expected return of the portfolio, and 4) the risk of the portfolio.

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    You have $200,000 saved for retirement split evenly between two stocks, X and Y. The expected returns and risks of each stock is provided under different economic states. You must calculate: 1) the expected return of each stock, 2) the risk of each stock, 3) the expected return of the portfolio, and 4) the risk of the portfolio.

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    19 views1 page

    12 TH

    Uploaded by

    Mohamed Gamal
    You have $200,000 saved for retirement split evenly between two stocks, X and Y. The expected returns and risks of each stock is provided under different economic states. You must calculate: 1) the expected return of each stock, 2) the risk of each stock, 3) the expected return of the portfolio, and 4) the risk of the portfolio.

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    Question (1) : You have saved $ 200,000 for retirement. The money is invested in a diversified portfolio of U.S.

    stocks (X & Y), assume a two stock portfolio with 100,000 in (X) and 100,000 (Y) and you have the following information about 2 securities (X & Y): State of the economy Probability X Y Recession 0.25 -0.22 0.28 Average 0.50 0.20 0.00 Boom 0.25 0.60 -0.20 a. Calculate the expected rate of return on X & Y. b. Calculate the stand-alone risk ( ) of X & Y. c. Calculate the expected rate of return on portfolio. d. Calculate the portfolio risk ( ).

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