Question No 2. (Marks 8)

Use the data set which is labeled on your name in Excel sheet. Names are given alphabetical from A to Z. [ Click on left or right to find the sheet with your name]

According to this information

Question 2
State of Economy	Probability of State of Economy	Rate of Return
		Stock A	Stock B	Stock C	Stock D		Stock	Dollar invested
Boom	20%	-10%	15%	14%	-14%		A	6,000
Good	45%	5%	11%	12%	-2%		B	24,000
Poor	22%	16%	-7%	-5%	25%		C	40,000
Bust	13%	42%	-24%	-9%	37%		D	30,000

1. What is the portfolios expected return?
2. What is the variance of the portfolio and standard deviation?
3. If you have to choose only one type of securities (stock A, B, C or D) which one will you choose and why? To answer this question, you need to calculate the expected return for each stock and the standard deviation, and compare their values.
4. What is the expected return and variance of a portfolio invested 25% each in A, B, C and D? Will the resulting portfolio structure bring you a higher expected return?
5. How should you change the shares of securities A, B, C and D in your portfolio in order to minimize risk and maximize expected returns? Explain your answers.

* You should describe each step in detail and provide intermediate calculations. Add tables from Excel if necessary.

* Do not delete anything from the Word file.

* Write your answers after each question.

* Be careful when rounding. Leave two decimal places.