1. Following table shows information of probable scenarios and associated return of an equity "Y". (Note: You must have to show the calculation) State Probability of Return in state Excellent Good Poor Crash State 0.25 0.45 0.25 0.1 0.35 0.18 -0.05 -0.52 a) Calculate expected return of the equity "Y". (5 points) b) Calculate standard deviation of the equity "Y". (5 points) c) Consider a risk-free asset "X" of which the rate of return is 3%. Create a portfolio that consists of risky equity "Y', and risk-free asset "X" Calculate portfolio return and standard deviation for each of following set of allocation of investment budget Allocation in equity Allocation in risk-free asset Portfolio return Portfolio SD 0.9 0.8 0.7 0.6 0.2 0.4 0.6 0.7 0.8 0.9 0.3 0.2 0.1 Draw a capital allocation line with horizontal axis showing portfolio SD and vertical axis showing portfolio return. (5 points) d) Calculate and interpret the sharp ratio. (5 points)