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Risk and return

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Risk and return

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • March 30, 2017 at 7:31 am #379619
    ash0814
    Member
    • Topics: 2
    • Replies: 1
    • ☆

    You have invested in stock A and B. There are two states of economy, the recession and the boom. The probability of the recession is 60%.
    Economic state Return A Return B
    Boom 40% 10%
    Recession 5% 20%
    (a) Calculate the expected return for stock A and B.
    (b) Calculate the standard deviation of stock A and B.
    (c) Calculate the correlation between stock A and B.
    (d) Calculate the standard deviation of a portfolio where ¼ of your money is invested in stock A and the remainder in stock B.
    (e) Calculate the standard deviation of a portfolio with equal weights in the risky assets.

    My answer for a is E(R) = 0.19 or 19% and E(R) = 0.16 or 16%
    b is 0.1715 or 17.15% and 0.4899 or 4.9%
    c is – 0.1266

    However, I am stuck for par D and E. Can you help please.

    March 30, 2017 at 8:33 am #379628
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54695
    • ☆☆☆☆☆

    Portfolio theory calculations are no longer in the syllabus for Paper P4 and have not been for some time!

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Viewing 2 posts - 1 through 2 (of 2 total)
  • The topic ‘Risk and return’ is closed to new replies.

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