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1. Considering the following information for stock P and stock Q, Probability of state of economy Rate of return if state occurs State of economy

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1. Considering the following information for stock P and stock Q, Probability of state of economy Rate of return if state occurs State of economy Boom Normal Recession 0.3 0.4 0.3 P 18% 12% -6% Q -5% 4% 12% i) What is the expected return for stock P? For Stock Q? ii) What is the standard deviation for Stock P? For stock Q? iii) What is the coefficient of variation for Stock P? For stock Q? iv) If you invest 40% of your money in stock P and 60% in stock Q, what is the expected return of the portfolio v) Find the return of your portfolio when a) economy is booming; b) economy is normal; and c) recession occurs vi) What is the standard deviation for your portfolio? (18 points in total)

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