Question: What are the expected return and standard deviation on a portfolio that is invested 40 percent in Stock X and 60 percent in Stock Y?

What are the expected return and standard deviation on a portfolio that is invested 40 percent in Stock X and 60 percent in Stock Y? (E(RP), SDP)

State of Economy Probability of State of Economy Rate of Return if State Occurs
Stock X Stock Y
Boom 6% 22% 18%
Normal 92% 15% 14%
Bust 2% 26% 9%

(14.32%, 3.02%)

(14.32%, 6.03%)

(14.14%, 6.03%)

(14.14%, 3.02%)

(14.32%, 3.13%)

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