Question: You have been given the following data: States Probability Bear Market 0.3 Normal Market 0.4 Bull Market 0.3 In addition, the risk free rate is

 You have been given the following data: States Probability Bear Market

You have been given the following data: States Probability Bear Market 0.3 Normal Market 0.4 Bull Market 0.3 In addition, the risk free rate is 6%. A -40% 18% 50% B -10% 20% 10% Compute the expected return of the stock A and the expected return of the stock B? Compute the risk of the stock A and the risk of the stock B Assume that you invest $ 120,000 in A and $ 30,000 in B. Compute the expected return and the risk of this portfolio Compute the expected return and risk of a complete portfolio in which you combine 40 % in the risky portfolio and the rest in the risk free asset Explain how to draw the Capital Allocation Line (CAL) and how to compute its slope

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