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(1) (15 marks) Consider the following information about two stocks where the probability of an economic boom is 25%: Economic State Return A (RA) Return

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(1) (15 marks) Consider the following information about two stocks where the probability of an economic boom is 25%: Economic State Return A (RA) Return B (RB) Boom Recession 17% -2% 4% 6% Calculate the expected return and standard deviation for stock A and stock B. (6 marks) ii Determine the correlation between stock A and stock B. (5 marks) Calculate the standard deviation of a portfolio, where 70% of your money is invested in stock A, and 30% of your money is invested in stock B. (4 marks)

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