Derive the expected returns and the standard deviation of returns for the two assets above.
Derive the expected returns and the standard deviation of returns for the two assets above.
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter13: Probability And Calculus
Section13.CR: Chapter 13 Review
Problem 6CR
Related questions
Question
Consider the case of two financial assets and three market conditions (states). The table
below gives the respective
in each one of them.
Market Conditions
State | Recession | Normal | Expansion |
Probability of state | 30% | 40% | 30% |
Return of asset A | -30% | 20% | 55% |
Return of asset B | -10% | 70% | 0% |
a. Derive the expected returns and the standard deviation of returns for the two assets
above.
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