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Homework answers / question archive / nalyst at Standard Bank wants to invest in two stocks, stock AA and BB and has been ded the following information on the stocks
nalyst at Standard Bank wants to invest in two stocks, stock AA and BB and has been ded the following information on the stocks. Use the information to answer the ons that follow Rate of Retum on stock 4A State of Economy Recession Normal Boom Probability of State of Economy 0.10 0.60 0 30 Rate of Retum on stock BB -10% 100% What is the expected retum on stock 4A and stock BB? (6 marks) What is the variance and standard deviation for stock AA and stock BB? (8 marks) What is the standard deviation of an equally weighted portfolio of these two stocks if the correlation is 0.2? (4 marks) Briefly, differentiate between systematic risk and firm specific risk. (2 marks)
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