Problem 1) Given the following data, What is the weight of security 1? Of security 2? 3? What is the expected return on the portfolio?
Security 1 ; $5,000 invested; Expected return 7%
Security 2; $7,000 invested; Expected return 9%
Security 3; $9,000 invested; Expected return 12%
Problem 2) The expected possible outcomes for Roxy Stock are below; what is the expected standard deviation of Roxy Stock?
State Probability Return
Super Boom 10% 35%
Boom 15% 20%
Expansion 45% 15%
Recession 30% -5%