Answered

Welcome to Westonci.ca, your go-to destination for finding answers to all your questions. Join our expert community today! Our platform provides a seamless experience for finding reliable answers from a knowledgeable network of professionals. Explore comprehensive solutions to your questions from a wide range of professionals on our user-friendly platform.

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % The expected rate of return and standard deviation of the global minimum variance portfolio, G, are ________ and ________, respectively.

Sagot :

It can be deduced that the expected rates of return of stocks A and B are 13.2% and 7.7% respectively.

How to calculate the expected rates of return

E(RA) = 0.1 (10%) + 0.2 (13%) + 0.2 (12%) + 0.3 (14%) + 0.2 (15%)= 13.2%

E(RB) = 0.1 (8%) + 0.2 (7%) + 0.2 (6%) + 0.3 (9%) + 0.2 (8%)= 7.7%

Therefore, the expected rates of return of stocks A and B are 13.2% and 7.7% respectively.

The standard deviation will be calculated thus:

Var(RA) = [0.1 (10%-13.2%)² + 0.2 (13%-13.2%)² + 0.2 (12%-13.2%)² + 0.3 (14%-13.2%)² + 0.2 (15%-13.2%)2 ] 1/2

= 1.5%

Var(RB) = [0.1 (8%-7.7%)² + 0.2 (7%-7.7%)² + 0.2 (6%-7.7%)² + 0.3(9%-7.7%)² + 0.2 (8%-7.7%)² ] 1/2

= 1.1%

Therefore, the standard deviation of stocks A and B are 1.5% and 1.1% respectively.

Learn more about rate of return on:

https://brainly.com/question/25821437

Thanks for stopping by. We strive to provide the best answers for all your questions. See you again soon. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.