1. Hardeep Singh is contemplating investing his money in stocks. After getting advice from a financial planner, he shortlists two stocks, Stock Alpha and Stock Delta, as possible stock investment. The following data was provided by the financial planner:

State of Economy	Probability	Rate of Return Stock Alpha (%)	Rate of Return Stock Delta (%)
Boom	0.3	11	33
Normal	0.6	7	13
Recession	0.1	6	-20

a. Calculate the expected return and standard deviation of each stock.

b. Calculate the covariance and correlation between the two stocks.

c. Calculate the expected return and standard deviation of a portfolio consisting of 50,000 shares of Alpha, currently selling at RM5 each, and 100,000 shares of Delta, currently selling at RM1.50 each.

d. If Hardeep Singh is a risk-averse investor who could invest his money either in Stock Alpha or Stock Delta only, or the portfolio in (c) above, which alternative should he choose? Explain your answer.