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Find the optimal portfolio in 1% increments for the following 2 stocks. State Prob.
Find the optimal portfolio in 1% increments for the following 2 stocks.
State Prob. A B
Recession 10% -14% 24%
Average 70% 9% -28%
Boom 20% 23% 36%
Need to find Expected return, standard deviation, coefficient of variation and Sharpe’s ration for all 101 combinations of A and B.
Use 2 portfolio formulas
Need correlation from Excel between A and B.
Weights will look like this in excel for all 101
Wa
Wb
0
1
0.01
0.99
0.02
0.98
0.03
0.97
0.04
0.96
0.05
0.95
0.06
0.94
0.07
0.93
RecessionAverageBoom Probability10%70%20% B24%-28%36% 10% Expected return A-14%9%23% Coefficient of variation-0.010.000.01 SD of A0.552%0.002%0.365% -10%0.00506 CorrelationWeight...