QUESTION 1

An analyst estimates that a stock has the following return probabilities and returns depending on the state of the economy. Calculate the percentage expected rate of returns.

Stae of Economy	Prob.	Return
Good	0.2	19%
Normal	0.4	12
Poor	?	6

QUESTION 2

Use the following table of states of the economy and stock returns to calculate the percentage standard deviation for Bradley.

		Security Returns if State Occurs
	Prob of State of Economy	Roten	Bradley
Bust	0.5	-10%	22.2%
Boom	?	40	7.1

QUESTION 3

Use the following table of states of the economy and stock returns to calculate the expected return on a portfolio of 49 percent Roten and the rest in Bradley.

		Security if State	Returns Occurs
	Prob of State of Economy	Roten	Bradley
Bust	0.8	-12%	29%
Boom	?	46	7

QUESTION 4

Use the following table of states of the economy and stock returns to calculate the percentage standard deviation of a portfolio of a portfolio of 80 percent Roten and the rest in Bradley.

		Security if State	Returns Occurs
	Prob of State of Economy	Roten	Bradley
Bust	0.2	-12%	30%
Boom	?	37	5

QUESTION 5

Use the following information to calculate the percentage expected return a portfolio that is 39.7 percent invested in 3 Doors, Inc., and the rest invested in Down Co.:

	3 Dorrs, Inc.	Down Co.
Expected return	23%	13%
Standard deviation	39	9
Correlation	88

QUESTION 6

Use the following information to calculate the percentage standard deviation of a portfolio that is 72.5 percent invested in 3 Doors, Inc., and the rest invested in Down Co.:

	3 Dorrs, Inc.	Down Co.
Expected return	16%	9%
Standard deviation	50	32
Correlation	0.35