Question: Problem 2: The following table shows the expected return from the investment in Stock A, Stock B and Stock C at different state of the

Problem 2: The following table shows the expected return from the investment in Stock A, Stock B and Stock C at different state of the economy.

State (i)

P(i)

E(R)Stock A

E(R)Stock B

E(R)Stock C

Recession

25%

-15%

19%

4%

Neutral

50%

14%

10%

8%

Boom

25%

32%

-4%

15%

  1. Find the expected return, variance and SD from each stock
  2. If you invest $10000 in Stock A, $ 12000 in Stock B and $15000 in Stock C, what is your total expected return from the portfolio?

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