Using the information in the above table answer the following questions:a. What is the expected return of a portfolio with 40% in FUSTA and 60% in FANSA? b. What are the portfolio’s variance and standard deviation using the same asset weights from part (c)? An equity analyst has projected the expected returns on the shares of two (2) publicly tradedcorporations, Fusta Inc. and Fansa Ltd, under three (3) different economic conditions. Theprobabilities of each economic state were determined by the Central Bank and are shown in Table2 below.TABLE 2State ofProbabilitReturn onReturn onEconomy y of StateFUSTAFANSABoom.250.2400.300Stagnant .350.0400.060Recessio .40-0.100-0.200n

Portfolio variance measures the dispersion of returns in a portfolio of assets and quantifies the…

Using the information in the above table answer the following questions: a. What is the expected return of a portfolio with 40% in FUSTA and 60% in FANSA? b. What are the portfolio’s variance and standard deviation using the same asset weights from part (c)?

Using the information in the above table answer the following questions: a. What is the expected return of a portfolio with 40% in FUSTA and 60% in FANSA? b. What are the portfolio’s variance and standard deviation using the same asset weights from part (c)?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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Question

An equity analyst has projected the expected returns on the shares of two (2) publicly traded
corporations, Fusta Inc. and Fansa Ltd, under three (3) different economic conditions. The
probabilities of each economic state were determined by the Central Bank and are shown in Table
2 below.
TABLE 2
State of
Probabilit
Return on
Return on
Economy y of State
FUSTA
FANSA
Boom
.25
0.240
0.300
Stagnant .35
0.040
0.060
Recessio .40
-0.100
-0.200
n

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