Recently appointed financial analyst at the Ducoin bank, you are responsible for providing the members...
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Finance
Recently appointed financial analyst at the Ducoin bank, you are responsible for providing the members of the Asset Management department with the data allowing them to review the composition of the portfolios they manage. You estimate that the future values, in one year, of the stocks you follow will depend on the economic situation. Three situations seem possible to you: growth (C), stability (S) and depression (D). The probabilities associated with each of them are 30%, 50% and 20% respectively. You have summarized your estimates in the following table
Cours actuel
Valeurs futures en cas de :
Croissance
Stabilit
Dpression
Probabilit
30%
50%
20%
March
100 $
140 $
112 $
70 $
Action A
25 $
50 $
20 $
17 $
Action B
40 $
10 $
35 $
50 $
2. Calculate their expected returns 3. Calculate the deviations of profitability from expected values in the three economic situations 4. What signs do you anticipate for the covariances of A and B with the market? 5. Calculate the variances and covariances. 6. What are the volatilities of the different securities. 7. Determine stock betas
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