1. Consider the returns for two stocks and the market over the past 10 years. Year 569L922545 10 A -6.99 13.75 3.53 0.64 18.52 -4.7 -5.58 6.86 21.51 21.3 B -1.46 16.53 9.53 8.51 15.65 6.73 4.7 0.25 10.35 8.63 Mkt -.87 8.07 12.97 14.81 15.87 12.07 3.89 5.10 13.87 10.01 a. You may classify each year where the market return was greater than 12% an "bad" economy. You may classify each year where the market return was less than 5% as "good" economy. Anything in the middle is a "normal" economy. There is a 10% chance of a "good" economy next year and a 40% chance of a "bad" economy. Using this, what is the expected return of Stock A? (15 pts) b. Today, you want to buy 400 shares of Stock A and 250 shares of Stock B. The stocks are selling for $26.35 and $58.35 each, respectively. Given this, and your findings from (a) and (b) above, what is the expected return on your portfolio? (15 pts)