Question: 3) Consider information given in the following table. (15 points) State of the Economy Recession Probability Return on Stock A (%) Return on Stock B

3) Consider information given in the following table. (15 points) State

3) Consider information given in the following table. (15 points) State of the Economy Recession Probability Return on Stock A (%) Return on Stock B (%) 0.1 0.3 0.6 2% 10% 20% -5% 8% 25% Boom Based on the information given in the above table, a) Calculate the expected return, variance of each stock, and the covariance between the two stocks b) If the weights of both stocks are 55% in A and 45% in B, respectively, what are the expected return and variance of the sum of these two stocks

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