Consider shock B, which has three possible returns; +50 percens, Oper- cent, &-50 porceN. The three possible rehirns are…

Question:

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Consider shock B, which has three possible returns; +50 percens, Oper-

cent, &-50 porceN. The three possible rehirns are equally probable!

What is the expected return & standard deviation return

for shock B?

Probability

25

. 25

25

·25

A

10

.05

-20

C

.15

O

25

·05

с

-505

. 10

-15

·05

(1) Compute

the expected returns to each slock.

(11) Compute the standard deviation of returns for each

shocks

il) Compute the covariaces “bet returns on each pair of

shocks.

Expert Answer:

Answer rating: 100% (QA)

i To compute the expected return for Stock B we will multiply each possible return by its correspond

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