1) based on the following information, calculate the expected return and standard deviation for the two stocks:

rate of return if stock occurs

state of economy profitability of state of economy stock A stock B

recession .15 .04 -.17

normal .55 .09 .12

boom .30 .17 .27

2) consider the following information

rate of return if stock occurs

state of economy profitability of state of economy stock A stock B stock c

boom .10 .35 .45 .27

good .60 .16 .10 .08

poor .25 -.01 -.06 -.04

bust .05 -.12 -.20 -.09

a) your portfolio is invested 30 percent each in A and C , and 40 percent in B. What is the expected return of the portfolio?

b)what is the variance of this portfolio? the standard deviation?