UVOD Part A Answer all the following five questions. Question 1 corries 20 points, question 2 carries 15 points, question 3 carries 8 points, question 4 corries 7 points and question 5 carries 10 points. 1. (20 points) Assume that the risk-free rate is 1%. Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.15 16% -8% 2 3 0.20 4 0.25 0.40 10% 0% 25% 6% -15% 3% (a) (2 points) Calculate the expected rate of return on stock A and B. (b) (2 points) Calculate the variance of returns on stock A and B, respectively. (c) (2 points) Calculate the correlation between the returns on stock A and B. (d) (4 points) Calculate the portfolio mean and variance of an equally-weighted portfolio comprising of stock A and B. (e) (4 points) Calculate the asset allocation and portfolio volatility of a minimum variance portfolio using stock A and B. (9 (6 points) Calculate the asset allocation and the Sharpe ratio of the tangent portfolio using stock A and B. o