Problem # 3

Consider the following 4 assets:

Market Condition	Probability	Returns
		Asset 1	Asset 2	Asset 3
Good	1/4	16	4	20
Average	1/2	12	6	14
Poor	1/4	8	8	8

Asset 4
Rainfall	Probability	Return
Heavy	1/3	16
Average	1/3	12
Light	1/3	8

Assume that there is no relationship between the amount of rainfall and the condition of the stock market

Solve for the expected return and the standard deviation of return for each asset.

Solve for the correlation coefficient and the covariance between each pair of assets.

Solve for the expected return and standard deviation of each of the following portfolios:

	Weight of Each Asset
Portfolio	Asset 1	Asset 2	Asset 3	Asset 4
A	1/2	1/2	0	0
B	1/2	0	1/2	0
C	1/2	0	0	1/2
D	0	1/2	1/2	0
E	0	0	1/2	1/2
F	1/3	1/3	1/3	0
G	0	1/3	1/3	1/3
H	1/3	0	1/3	1/3
I	1/4	1/4	1/4	1/4

Please show all work