Question: Weather situation Probability Return on Umbrella stock Return on Ice Cream stock Sunny 70% -2% 9% Rainy 30% 10% -4% 1. Calculate the expected rate

 Weather situation Probability Return on Umbrella stock Return on Ice Cream

Weather situation Probability Return on Umbrella stock Return on Ice Cream stock Sunny 70% -2% 9% Rainy 30% 10% -4% 1. Calculate the expected rate of return on investment in Umbrella stock and Ice Cream stock. 2. Calculate the standard deviations for umbrella stock return and Ice Cream stock return. 3. What's the portfolio expected return if you invested $1,000 and $3,000 respectively in Umbrella and Ice Cream? 4. T-bill yields 50 basis points. Market portfolio yields 4.9%. Calculate betas for Umbrella, Ice Cream, and the portfolio. 5. Draw the security market line and locate T-bill, Umbrella, Ice Cream and the portfolio in the return-risk coordinate system

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