QUESTION 3
You are considering the two securities listed below.
Returns
Probability
Securities A
Securities B
25%
13%
7%
50%
15%
13%
25%
17%
33%
Using these stocks, you have identified two investment portfolio alternatives:
Alternative 1
100% Stock A
Alternative 2
40% Stock A, 60% Stock B
Calculate the expected return for each security.
Calculate the standard deviation for each security
Which security will you choose to put in your portfolio? Explain.
Calculate the covariance t for the above securities.