1.The expected return on Big Time Toys is 6 percent and its standard deviation is 21 percent. The expected return on Chemical Industries is -5 percent and its standard deviation is 21 percent. Suppose the correlation coefficient for the two stocks' returns is -0.3. What are the expected and standard deviation of a portfolio with 35 percent invested in Big Time Toys and the rest in Chemical Industries?

Enter your answers as percentages rounded to 2 decimal places. Do not include the percentage sign in your answers.

E(rp) =

Std. Dev. =

2.Consider the following two stocks.

Probabilities (pi) Stock "a" Stock "b"

Recession p1=24% -4% 3%

Normal p2=32% 4% -15%

Boom p3=44% 16% 20%

a) What is the expected return of each stock? Enter your answers as a percentage rounded to 2 decimal places.Do not enter the percentage sign in your answer.

ra=

rb=

b) Using the correct answers from the previous question, what is the standard deviation of each stock? Enter your answer as a percentage rounded to 2 decimal places.Do not enter the percentage sign in your answer.

SDa=

SDb=

c) Using the correct answers from the previous questions, what is the covariance between the two stocks? Enter your answer rounded to 2 decimal places.

Cov(a,b)=

d) Using the correct answers from the previous questions, what is the correlation between the two stocks? Enter your answer rounded to 2 decimal places.

Corr(a,b)=

3.Consider the following two stocks.

Probabilities (pi) Stock "a" Stock "b"

Recession p1=38% -10% 4%

Normal p2=38% 6% -2%

Boom p3=24% 18% 20%

The portfolio weights for stocks "A" and "B" are 0.4 and 0.6, respectively.

a) What arethe expected returns of stock "A" and "B"? Enter your answers as a percentage. Do not put the percent sign in your answers. Round your answers to 2 DECIMAL PLACES.

E(ra)=

E(rb)=

b) Using the correct answers from the previous question, what arethe standard deviations of stocks "A" and "B"? Enter your answers as a percentage.Do not put the percent sign in your answers. Round your answers to 2 DECIMAL PLACES.

SDa=

SDb=

c) Using the correct answers from the previous questions, what is the expected return of the portfolio? Enter your answeras a percentage. Do not put the percent sign in your answer. Round your answer to 2 DECIMAL PLACES.

E(rp)=

d) Using the correct answers from the previous questions, what is the standard deviation of the portfolio? Enter your answer as a percentage. Do not put the percentage sign in your answer. Round your answer to 2 DECIMAL PLACES.

SDp=