1.An investor is considering the purchase of Gryphon stock, which has returns given in the table below.

Scenario Probability Rate of Return

Recession 0.12 -1%

Normal 0.44 12%

Boom 0.44 14%

a) Calculate the expected return and standard deviation of Gryphon. Round your answers to 2 decimal places.

E(r) =%

Std. Dev. =%

b) The investor decides to diversify by investing $10,000 in Gryphon stock and $9,000 in Royal stock which has an expected return of 11.5% and a standard deviation of 11%. The correlation coefficient for the two stocks' returns is 0.3. Calculate the expected return and standard deviation of the portfolio. Round your answers to 2 decimal places.Use the correct answers from the previous question.

E(rp) =%

Std. Dev =%

2.Consider a portfolio that contains two stocks. Stock "A" has an expected return of 10% and a standard deviation of 25%. Stock "B" has an expected return of 7% and a standard deviation of 17%. The proportion of your wealth invested in stock "A" is 35%. The correlation between the two stocks is -0.45.

a) What is the expected return of the portfolio? Enter your answer as a percentage. Do not include the percentage sign in your answer.

Enter your response below rounded to 2 DECIMAL PLACES.

b) What is the standard deviation of the portfolio? Enter your answer as a percentage. Do not include the percentage sign in your answer.

Enter your response below rounded to 2 DECIMAL PLACES.