Question: A B Boom 1/3 25% 1% Normal 1/3 5% 5% Recession 1/3 -5% 12% Refer to the attachment, which provides expected returns for 2 assets-

A B

Boom 1/3 25% 1%

Normal 1/3 5% 5%

Recession 1/3 -5% 12%

Refer to the attachment, which provides expected returns for 2 assets- "A" & "B" for 3 different states of nature: Boom, Normal, & Recession. Each state is considered to be equally probable.

For each of the following calculations, express your answer in percentage terms, rounded to 2 decimal places (ie 22.00).

What is the expected return for Asset A, E(R_A)? %

What is the expected standard deviation in returns for Asset B? %

Suppose that a portfolio is created with an equal weight invested in each of Asset A & Asset B.

What is the expected return for the porfolio, E(R_P)? %

What is the expected standard deviation in returns for the portfolio? %

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