Consider Table below for Question $1$

Suppose that wou have $$100,000$ for investments. Diversification is important in investing. Thesefore, you

divide equally the investment money into two stocks: Stock. A and Stock. B$.$ Based on this setup, compute the

expected retiams on the portfolio of Stock A and Stock B $(25$ points$).$ Compute yotar portfolio risk $(30$ points$).$

Use the following formulas.

$\frac{?}{\text{b}\text{a}\text{r}}(r{)}_A($ expected value $of$ stockA$)=(r_A^{8d})*P_{\text{E}\text{x}\text{d}}+(r_A^{\text{G}\text{o}\text{o}\text{d}})*P_{\text{G}\text{o}\text{o}\text{d}}$

${}_H^2=W_A^2*{}_A^2+W_B^2{}_B^2+2*W_A^{\text{'}}{W}_A*Cov(A,B)$

Cov$(A,B)=(r_A^{\text{P}\text{a}\text{d}}\frac{-}{b}ar(r{)}_A)(r_R^{\text{P}\text{a}\text{d}}\frac{-}{b}ar(r{)}_B)*P_{321}+(r_A^{\text{G}\text{o}\text{s}\text{d}}\frac{-}{b}ar(r{)}_A)(r_A^{\text{C}\text{o}\text{s}\text{d}}\frac{-}{b}ar(r{)}_D)*P_{\text{G}\text{o}\text{n}\text{d}}$

Where $W_A=$ the weight of your investment in $5$ tock $A$;$T_A=$ the expected return on $5$tockA; ${}_p^2$; is the variance of

the portfolio of Stock A and Stock $B_{\text{;}}{}_A$ is the standard deviation of returns on Stock $A.{}_A^2$ is the variance of

returns on Stock A: $P_{\text{e}\text{a}\text{d}}$ is the problability of "bad" economuc condition in the future, $r_A^{\text{a}\text{t}\text{e}\text{d}}$ is the expected return

on Stock A if the economic condition is good in the future. Similar letter notations were applied to $5$ tock B$.$