Question: Problem 2: Given the following probability distributions: Market Condition Probability Stock A Stock B ______________________________________________ High Growth 0.3 40% 30% Average 0.5 20% 15% Low

Problem 2: Given the following probability distributions: Market Condition Probability Stock A Stock B ______________________________________________ High Growth 0.3 40% 30% Average 0.5 20% 15% Low Growth 0.1 5% -5% Poor 0.1 -15% 0% I) A portfolio is formed by investing 50% of the funds in Stock A and 50% in Stock B; (A) Calculate the expected return on the portfolio. (B) Calculate the standard deviation of the portfolio. II) A portfolio is formed by investing 65% of the funds in Stock A and 35% in Stock B; (C) Calculate the expected return on the portfolio. (D) Calculate the standard deviation of the portfolio.

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