Portfolio returns You have had the following portfolio returns over the past 10 years. Also included are the market returns for the same period of time.

You may assume that a market return in excess of 15 % is a boom market. Any negative return is a recessionary market. Everything in between is a normal market.

(a) The probability of an expansion next year is 15 %, while the probability of a contraction is 20 %. Based upon this, what is your expected return?

(b) Based upon these values, what is your historical standard deviation?

(c) Based upon these values, what is the probability your return next year will be less than 5 %?

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234567 Year 1 Your retum 14.43 % 17.90 % Market return 9.43 % 7.09% 21.04 % -9.10 % -11.89% -22.10 % 5 11.94 % 28.69 % 6 13.33 % 10.88% 15.00 % 4.91 % 8 10.41 % 15.79 % 9 -2.54 % 10 -7.92 % 5.49 % -38.49 %