PLEASE ANSWER ALL 7 =====================Returns% Period======= Probability--- I

Question

PLEASE ANSWER ALL 7



=====================Returns%
Period======= Probability--- Intel--- GE
Boom ========0.4----------- 20 -----10
Normal =======0.3 -----------15----- 10
Recession ======0.3----------- 12----- 8

PLEASE ANSWER ALL 7 QUESTIONS

1) Compute the expected rate of returns for Intel and GE. (5)

2) Compute the risks of holding Intel and GE (10)

3) Which one is more risky Intel or GE? (5)

4) Construct a portfolio where 60% is invested in Intel and 40% in GE and compute the
expected rate of return for the portfolio. (5)

5) Compute the covariance of the two return series. (10)

6)Compute the correlation coefficient of the two return series. (5)

7) Compute the risk of the portfolio.

Thank you!

Explanation / Answer

1) Expected return for intel=0.4*20+0.3*15+0.3*12=16.1 %

Expected return for GE=0.4*10+0.3*10+0.3*8=9.4

2)By risk if you meant risk factor BETA , then that is not given in your question. So it is not possible to calculate risk without any prior information .

3)Same as above

4)0.6*16.1+0.4*9.4=13.42%

5)For these as well information is either missing or i am not able to understand the terms used in your country for finance and same is for follow up questions .sorry

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