You have been give this Probability distribution for the expected return of Stocks Bonds Recession 0.25 -4.5% - 2%% Normal growth 0.45 5% 4% Boom 0.30 15% 7% a. Calculat the expected rate of return of stock and bond b. Calculate the standard deviation for each investment? c. Compute the coefficient of variation? d. If an investor allocate 60% of asset t stock and remaining to bond, what would be the investor's portfolio returns and standard deviation? e. Is there any diversification benefit achived?

You have been give this Probability distribution for the expected return of Stocks Bonds Recession 0.25 -4.5% - 2%% Normal growth 0.45 5% 4% Boom 0.30 15% 7% a. Calculat the expected rate of return of stock and bond b. Calculate the standard deviation for each investment? c. Compute the coefficient of variation? d. If an investor allocate 60% of asset t stock and remaining to bond, what would be the investor's portfolio returns and standard deviation? e. Is there any diversification benefit achived?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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