Homework SourseWhat is the standard deviation of the returns on a 30000 por
What is the standard deviation of the returns on a $30,000 portfolio which consists of stocks S and T? Stock S is valued at $21,000.
State of economy
Probability of state
Return on Stock S
Return on Stock T
Boom
15%
11%
5%
Normal
70%
8%
6%
Recession
15%
-5%
8%
3.63 percent
3.45 percent
3.21 percent
2.91 percent
2.61 percent
| State of economy | Probability of state | Return on Stock S | Return on Stock T |
| Boom | 15% | 11% | 5% |
| Normal | 70% | 8% | 6% |
| Recession | 15% | -5% | 8% |
Solution
11*15 =165 / 100 = 1.65
8*70 =560 / 100 = 5.6
15*5 = 75/100 = -0.75
15*5= 75/100 =0.75
70*6 = 420/100=4.2
15*8=120/100=1.2
1.65+5.6-0.75 / 3 = 2.1666
