Assume that you are considering selecting assets from among the following four candidates:

Assume that there is no relationship between the amount of rainfall and the condition of the stock market.
A. Solve for the expected return and the standard deviation of return for each separate investment.
B. Solve for the correlation coefficient and the covariance between each pair of investments.
C. Solve for the expected return and variance of each of the portfolios shown in the following.

D. Plot the original assets and each of the portfolios from Part C in expected return standard deviation space.

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Asset 1 Asset 2 Market Market Condition Probability Probability Condition Good Average Return 16 12 Return 6 Average Poor oor Asset 3 Asset 4 Market Condition Good Average Poor Rainfall Plentiful Average Light Probability Probability Return 20 14 Return 16 12 Portions Invested in Each Asset Portfolio Asset 1 Asset 2 Asset 3 Asset 4 2 1 1 2 2