Stock returns, deviation and portfolio, business and finance homework help

There are two stocks in the market: Stock A and Stock B. The price of Stock A today is $74. The price of Stock A next year will be $63 if the economy is in a recession, $86 if the economy is normal, and $96 if the economy is expanding. The probabilities of recession, normal times, and expansion are .19, .61, and .20, respectively. Stock A pays no dividends and has a correlation of .69 with the market portfolio. Stock B has an expected return of 13.9 percent, a standard deviation of 33.9 percent, a correlation with the market portfolio of .23, and a correlation with Stock A of .35. The market portfolio has a standard deviation of 17.9 percent. Assume the CAPM holds.

 Please show all work/formulas step by step!
 

a-1.

What is the return for each state of the economy for Stock A? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Return
 Recession  %  
 Normal  %  
 Expanding  %  

 
 

a-2.

What is the expected return of Stock A? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

 Expected return

 
 

a-3.

What is the variance of Stock A? (Do not round intermediate calculations and round your final answer to 4 decimal places (e.g., 32.1616).)

 Variance  

 
 

a-4.

What is the standard deviation of Stock A?(Do not round intermediate calculations.Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

 Standard deviation

 
 

a-5.

What is the beta of Stock A? (Do not round intermediate calculations and round your final answer to 3 decimal places (e.g., 32.161).)

 Beta of Stock A  

 
 

a-6.

What is the beta of Stock B? (Do not round intermediate calculations and round your final answer to 3 decimal places (e.g., 32.161).)

 Beta of Stock B  
If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer?
Stock B
Stock A

 
 

b-1.

What is the expected return of a portfolio consisting of 65 percent of Stock A and 35 percent of Stock B? (Do not round intermediate calculations.Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

 Expected return
b-2.

What is standard deviation of a portfolio consisting of 65 percent of Stock A and 35 percent of Stock B?(Do not round intermediate calculations.Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

 
 

 Standard deviation
c.

What is the beta of the portfolio in part (b)? (Do not round intermediate calculations and round your final answer to 3 decimal places (e.g., 32.161).)

 Beta of the portfolio  

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