4.22. A portfolio consists of the following three stocks, whose performance depends on the economic environment:

Investment($) good bad stock 1 500 13% 20%
stock 2 1,250 6% 3%
stock 3 250 7% 2%

Assuming that the good economic environment is twice as likely as the bad one, compute the expected return and variance of the portfolio.
What if $1,000 of stock 4, which has a mean return of 4%, a variance of .02, and is uncorrelated with the preceding portfolio, is added to the portfolio? How will this change the expected return and variance of the total investment?