1. (20 points) Assume that the risk-free rate is 1%. Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.15 16% -8% 2 0.40 10% 0% 3 0.20 25% 6% 4 0.25 -15% 3% (a) (2 points) Calculate the expected rate of return on stock A and B. (b) (2 points) Calculate the variance of returns on stock A and B, respectively. (c) (2 points) Calculate the correlation between the returns on stock A and B. (d) (4 points) Calculate the portfolio mean and variance of an equally-weighted portfolio comprising of stock A and B. (e) (4 points) Calculate the asset allocation and portfolio volatility of a minimum variance portfolio using stock A and B. (f) (6 points) Calculate the asset allocation and the Sharpe ratio of the tangent portfolio using stock A and B