Look at the tabel showing return of stock X and stock Y in three scenarios...
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Finance
Look at the tabel showing return of stock X and stock Y in three scenarios (Expansion, Normal, and Recession). The probability of each scenario is given in the table.
Probability
x
y
E
35%
15%
1%
N
45%
8%
1%
R
35%
-5%
1%
You are considering 3 different portfolios as investment opportunities:
Portfolio 1: 10% in stock X and 90% in stock Y
Portfolio 2: 20% in stock X and 80% in stock Y
Portfolio 3: 30% in stock X and 70% in stock Y
What are the expected returns on portfolios 1, 2 and 3?
What are the standard deviations on portfolios 1, 2 and 3s returns?
In which of these portfolios should a investor invest in and why?
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