1.

Consider the following information:

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Recession	.40	.09
Boom	.60	.21

Required:

Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return

%

2.

Consider the following information:

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Recession	.22	.12
Normal	.48	.14
Boom	.30	.33

Required:

Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return

%

3.

Consider the following information:

		Rate of Return if State Occurs
State of	Probability of State
Economy	of Economy	Stock A	Stock B
Recession	.23	.025	.38
Normal	.58	.105	.28
Boom	.19	.270	.51

Requirement 1:

Calculate the expected return for the two stocks. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

	Expected return
E(RA)	%
E(RB)	%

Requirement 2:

Calculate the standard deviation for the two stocks. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

	Standard deviation
A	%
B	%

4.

You have $266,000 to invest in a stock portfolio. Your choices are Stock H, with an expected return of 14.1 percent, and Stock L, with an expected return of 11.7 percent.

Required:

If your goal is to create a portfolio with an expected return of 12.8 percent, how much money will you invest in Stock H and in Stock L? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Investment in Stock H	$
Investment in Stock L	$