Question: Based on the following data; (a) calculate the expected return and the standard deviation of returns for each stock. State of the Economy Probability Stock

Based on the following data;

(a) calculate the expected return and the standard deviation of returns for each stock.

State of the Economy Probability Stock A Rate of Return Stock B Rate of Return

Recession 0.25 6% -20%

Normal Growth 0.45 7% 13%

Boom 0.3 11% 33%

(b) Calculate the expected return and the standard deviation on the portfolio, where

the portfolio is formed by investing 65% of the funds in Stock A and the rest in Stock B

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