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FINC 4542 --- Assignment 1
(Show work--- formulas with values plugged in)
The following information applies to the next 4 questions
State of Probability Stock X S&P 500
Economy
Boom 30% 50% 10%
Normal Growth 50% 18% 20%
Recession 20% -20% -15%
1. What is the expected return on stock X?
2. What is the standard deviation of returns on stock X?
3. What is the covariance of returns between stock X and the S&P 500?
4. What is the correlation coefficient between stock X and the S&P 500?
The following information applies to the next 4 questions
Year Returns
MSFT S&P 500
2013 40% 10%
2014 18% 17%
2015 33% 23%
5. What is the mean return for MSFT?
6. What is the standard deviation of returns for MSFT?
7. What is the covariance of returns between MSFT and the S&P 500 stock index?
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