=+To assist your final decision the broker provides you with forecasts by expert City analysts for shares in A and B given various states of the economy - see Table 1.

Table 1 State of Probability of Returns on A Returns on B the economy that state of

(%)

(%)

the economy Recession 0.25 10 15 Growth 0,50 20 55 Boom 0.25 30

-10 Table 2 Portfolio 2 123 Proportion of portfolio invested. in A (%) 25 Proportion of portfolio invested in B (%) 75 328 75 90 222 25 10 Required a Compare the risk and return of the alternatives (including your original intention of putting all the money into either A or B).