1.

Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom.

Probability of each scenario, stock and bond annual returns in that scenario are provided below.

Lets also assume that you are creating a portfolio with 65% stocks and 35% bonds.

Economy State	Probability	Stock Return (%)	Bond Return (%)
Severe recession	0.20	-37	-9
Mild recession	0.30	-11	15
Normal growth	0.40	14	8
Boom	0.10	30	-5

How much is the expected annual return on Stocks?

Enter your answer in the following format: + or - 0.1234

Hint: Answer is between -0.0189 and -0.0231

____________?

2.

Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom.

Probability of each scenario, stock and bond annual returns in that scenario are provided below.

Lets also assume that you are creating a portfolio with 65% stocks and 35% bonds.

Economy State	Probability	Stock Return (%)	Bond Return (%)
Severe recession	0.20	-37	-9
Mild recession	0.30	-11	15
Normal growth	0.40	14	8
Boom	0.10	30	-5

How much is the annual standard deviation of Bond returns?

Enter your answer in the following format: 0.1234

Hint: Answer is between 0.0836 and 0.0982

3.

Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom.

Probability of each scenario, stock and bond annual returns in that scenario are provided below.

Lets also assume that you are creating a portfolio with 65% stocks and 35% bonds.

Economy State	Probability	Stock Return (%)	Bond Return (%)
Severe recession	0.20	-37	-9
Mild recession	0.30	-11	15
Normal growth	0.40	14	8
Boom	0.10	30	-5

How much is the correlaton between Stock and Bond annual returns?

Enter your answer in the following format: + or - 0.1234

Hint: Answer is between 0.2678 and 0.3207

4.

Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom.

Probability of each scenario, stock and bond annual returns in that scenario are provided below.

Lets also assume that you are creating a portfolio with 65% stocks and 35% bonds.

Economy State	Probability	Stock Return (%)	Bond Return (%)
Severe recession	0.20	-37	-9
Mild recession	0.30	-11	15
Normal growth	0.40	14	8
Boom	0.10	30	-5

How much is the expected annual portfolio return?

Enter your answer in the following format: + or - 0.1234

Hint: Answer is between 0.0047 and 0.0057

5.

Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom.

Probability of each scenario, stock and bond annual returns in that scenario are provided below.

Lets also assume that you are creating a portfolio with 65% stocks and 35% bonds.

Economy State	Probability	Stock Return (%)	Bond Return (%)
Severe recession	0.20	-37	-9
Mild recession	0.30	-11	15
Normal growth	0.40	14	8
Boom	0.10	30	-5

How much is the annual standard deviation of the portfolio returns?

Enter your answer in the following format: 0.1234

Hint: Answer is between 0.1416 and 0.1693