Stock S is expected to return 12 percent in a boom, 9 percent in a normal economy, and 2 percent in a recession. Stock T is expected to return 4 percent in a boom, 6 percent in a normal economy, and 9 percent in a recession. The probability of a boom is 10 percent while the probability of a recession is 25 percent. What is the standard deviation of a portfolio which is comprised of $4,500 of Stock S and $3,000 of Stock T

Respuesta :

Answer :

The expected standard deviation of both  stock is 3.324% and 1.53%

Explanation:

The first step is to compute the expected value and the standard deviation of each stocks.

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