Question: 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.