10.3 Refer to Exhibit 10.2

			rate	Of	return	If	state	occurs
Economic state	Probability of occurrence	A	B	C	D	AB	AC	AD
Very poor	.10	-10%	30%	-25%	15%	10%	-17.5%	2.5%
Poor	.20	0	20	-5	10	10	-2.5	5
Average	.40	10	10	15	0	10	12.5	5
Good	.20	20	0	35	25	10	27.5	22.5
Very good	.10	30	-10	55	35	10	42.5	32.5
	1.00
Expected rate of return		10.0%	10.0%	15.0%	12.0%	10.0%	12.5%	11.0%
Standard deviation		11.0%	11.0%	21.9%	12.1%	0.0%	16.4%	10.1%

construct an equal weighted (50/50) portfolio of investments B and C. What is the expected rate of return and standard deviation of the portfolio. Explain your results?

b. Construct an equal-weighted (50/50) portfolio of investments B and D. What is the expected rate of return and standard deviation of the portfolio? Explain your results.