Calculating portfolio expected return-standard deviation


Problem:

Andy Castaneda owns 3 stocks and has estimated the following joint probability distribution of returns:

Outcome    Stock A    Stock B    Stock C    Probability
1                 -10            10            0            0.30
2                   0             10           10           0.20
3                  10             5            15           0.30
4                  20           -10            5            0.20

Calculate the portfolio’s expected return and standard deviation if Andy invests 20% in stock A, 50% in stock B, and 30% in stock C.  Assume that each security’s return is completely uncorrelated with the returns of the other securities.

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Finance Basics: Calculating portfolio expected return-standard deviation
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