Chapter 5 -- Financial Risk and Required Return PROBLEM 5 a. Construct an equal-weighted (50/50) portfolio of Investments B and C. What is the expected rate of return and standard deviation of the portfolio? Explain your results. b. Construct an equal-weighted (50/50) portfolio of Investments B and D. What is the expected rate of return and standard deviation of the portfolio? Explain your results. Table 5a State Probability B C BC Very poor 0.1 30% -25% 2.5% Poor 0.2 20% -5% 7.5% Average 0.4 10% 15% 12.5% Good 0.2 0% 35% 17.5% Very good 0.1 -10% 55% 22.5% 6 Table 5b State Probability B D BD Very poor 0.1 30% 15% 22.5% Poor 0.2 20% 10% 15.0% Average 0.4 10% 0% 5.0% Good 0.2 0% 25% 12.5% Very good 0.1 -10% 35% 12.5%