Problem:
Condition PRobability StockA StockB
Weak 10% 10.00% 17.00%
Below Average 20% 18.50% (21.29%)
Normal 40% 38.67% 44.25%
Above Average 20% 14.33% 11.67%
Strong 10% (33.00%) 28.30%
Q1. Calculate the expected return of each stock (A%B).
Q2. Compute the standard deviation of each stock - A and B.
Q3. Based on your analysis from a and b above, which syock would you choose for investment and why?
Q4. Suppose you have a portfolio that consists of stock A stock B. The total value of your portfolio is $150,000. Out of the total value, $97,500 was invested in stock B and the rest in stock A. Calculate the expected return of your portfolio.