23. A financial analyst has estimated state-dependent returns for Assets A and B, R_A,S and R_B,S for each of two states (S) for the coming year, as well as probability of each state (P_S).

S	PS	RA,S	RB,S
1	0.6	0.30	0.20
2	0.4	0.00	0.10

What are the expected return and standard deviation of return of a portfolio composed of 50% Asset A and 50% Asset B? (Set your device to show 6 decimal places.)

a. Expected return = 0.150, standard deviation = 0.1000.

b. Expected return = 0.170, standard deviation = 0.0205.

c. Expected return = 0.170, standard deviation = 0.0980.

d. Expected return = 0.172, standard deviation = 0.1078.

24. You wish to calculate the equilibrium expected return for Stock I, E(R. You assume that the capital asset pricing model holds. You know that the risk-free return is 0.01 (1%), the market risk premium is 0.07, and the covariance between the return on Stock I and the market portfolio is 0.08. You also know that an efficient portfolio has and expected return of 0.0625 and a return standard deviation of 0.15. What is the expected return on Stock I?

a. 0.0450

b. 0.1150

c. 0.1500

d. 0.1733

25. You know the following facts about Assets C and D: E(R_C) = 0.093, _C = 0.80, E(R_D) = 0.178, _D = 1.8. If both assets are correctly priced, what is the risk-free return, R_F?

a. 0.010

b. 0.015

c. 0.020

d. 0.025