According to the analysts, the return on Company A's stock in the coming year could be -10%, 1%, 7%, or 15%. The corresponding probabilities are 25%, 15%, 20%and 40%, respectively. In comparison, the return on Company B's stock in the coming year could be - 5%, - 1%, 4%, or 12%. The corresponding probabilities are 10%, 30%, 20%, and 40%, respectively. Suppose we have invested 35% of our capital in A's stock and 65% in B's stock. Historical data suggest that the correlation coefficient between the two stocks is 0.65.
What is the standard deviation of each stock?
What is the expected return on our portfolio?
What's the standard deviation of the return on our portfolio?