Scenario Probability X return rate Y return rateBoom 25% 15% 10%Normal 60% 10% 9%Recession 15% 5% 10%1. Calculate the expected return and standard deviation of returns of each stock. 2. Calculate the expected return and standard deviation of return for a portfolio with an investment of $6,000 (60%) in stock X and $4,000 (40%) in stock Y. In order to do so, you need to calculate the variance and standard deviation of each stock and the covariance of returns between stock X and stock Y. Thank you!!
Calculate the expected return and standard deviation of for single stocks and portfolioYou have estimated the following probability distributions of expected future returns from stocks X and Y: What is the expected return for stock X and Y?Expected return of X = ??Expected return of Y = ??What is the standard deviation of expected returns for stock X and Y?Standard deviation of X = ??Standard deviation of Y = ??Calculate the expected return and standard deviation of the mix of 50% X and 50% Y. Expected return of the mix of 50% X + 50% Y = ??Which stock would you consider to be riskier, X, Y, or 50% X + 50% Y? Why? (hint: calculate the coefficient of variation (COV) = standard deviation / expected return and compare. ) Hints: please study the slides for the explanation of calculations. Cov of X = ??Cov of Y = ??Cov of ( 50% X + 50% Y) = ??Which do you pick? —- ??