1. Math
2. Statistics And Probability
3. you are trying to develop a strategy for investing in...

# Question: you are trying to develop a strategy for investing in...

###### Question details

You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a​ $1,000 investment in each stock under four different economic conditions has the probability distribution shown to the right. Complete parts​ (a) through​ (d).  Returns Probability Economic Condition Stock X (in$’s) Stock Y (in \$’s) 0.4 Recession - 55 -80 0.1 Slow growth 30 50 0.2 Moderate growth 110 130 0.3 Fast growth 160 200

Note: Include Excel formulas.

(a)    Compute the expected return for stock X and for stock Y.

(b)   Compute the standard deviation for stock X and for stock Y.

(c)    If the correlation between X and Y is 0.98,compute the mean and the standard deviation of a simple portfolio with 50% of the initial investment in Stock X and 50% of the initial investment in Stock Y.