Cannot use Excel, only use formula. This question is focused on the chapters Capital Market History, and Return risk and the security market line.

Problem 2 (34 marks) You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of State of Stock Stock Stock Stock Economy Economy B C D T-bills Boom 30 20% 25% 20% -10% 3% Normal .40 15% 12% 16% 15% 3% Recession .30 -16% -15% -8% 25% 3% * Remember to show all of your work * Stock Market 20% 15% -8% g. Calculate the risk for stock A. (2 marks) h. Calculate the risk for stock B. (2 marks) i. Calculate the risk for stock C. (2 marks) j. Calculate the risk for stock D. (2 marks) k. Calculate the risk for T-bills. (2 marks) I. Calculate the risk for the stock market. (2 marks) m. Calculate the covariance and correlation of the returns for stock A and stock B. (2 marks) n. Calculate the covariance and correlation of the returns for stock A and stock C. (2 marks) o. Calculate the covariance and correlation of the returns for stock A and stock D. (2 marks) p. Calculate the covariance and correlation of the returns for stock B and stock C. (2 marks) q. Calculate the covariance and correlation of the returns for stock B and stock D. (2 marks) Calculate the covariance and correlation of the returns for stock C and stock D. (2 marks) r