Use the following information to answer questions below.

State Probability Return on A Return on B

Boom .25 15% –3%

Normal .65 10% 4%

Bust .10 4% 9%

a. Calculate the expected returns for A and B.

b. Calculate the standard deviations for A and B.

c. Calculate the covariance of the two companies.

d. What is the expected return on a portfolio with weights of 40% in asset A and 60% in asset B?

e. What is the standard deviation of a portfolio with weights of 40% in security A and the remainder in security B?

f. What is the correlation coefficient of the two securities?