Question: 3. Using the following table to answer parts a) to c). Recession Normal Boom Probability 0.1 0.6 0.3 Stock INV -10% 18% 25% Stock DEV

3. Using the following table to answer parts a) to c). Recession Normal Boom Probability 0.1 0.6 0.3 Stock INV -10% 18% 25% Stock DEV -20% 20% 40% a) What are the expected rates of return for Stocks INV and DEV? 2 marks b) What are the standard deviations of returns on Stocks INV and DEV? 5 marks c) Assume you invest $8,000 in Stock INV and $2,000 in Stock DEV, what is the expected return on your portfolio? 2 marks

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