1.Consider the following two stocks.

Probabilities (pi) Stock "a" Stock "b"

Recession p1=31% -3% 3%

Normal p2=38% 1% -14%

Boom p3=31% 20% 22%

What is the expected return of each stock? Enter your answers as a percentage rounded to 2 decimal places.

Expected return a=

Expected return b=

2.The expected return on Big Time Toys is 13 percent and its standard deviation is 20 percent. The expected return on Chemical Industries is 5 percent and its standard deviation is 12 percent. Suppose the correlation coefficient for the two stocks' returns is 0.3. What are the expected and standard deviation of a portfolio with 55 percent invested in Big Time Toys and the rest in Chemical Industries?

Enter your answers as percentages rounded to 2 decimal places.

E(r_p) =

Std. Dev. =

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

Scenario Probability Rate of Return

Recession 0.1 1%

Normal 0.42 6%

Boom 0.48 14%

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

E(r) =

4.During the past 10 years, the percent returns on two mutual funds (aggressive and passive) expressed in percentages were as follows:

Note that this is a sample of returns.

Year Aggressive Fund Passive Fund

-10 2% 4%

-9 6% 4%

-8 0% 4%

-7 2% 2%

-6 9% 3%

-5 2% 3%

-4 10% 2%

-3 1% 4%

-2 1% 2%

Last Year 4% 3%

a) Compute the expected return for the two funds.Round your answers to two decimal places.

Aggressive =

Passive =

b) Compute the variance and standard deviation of the returns of the two funds.Round your answers to two decimal places.

Variance=

Aggressive =

Passive =

Standard Deviation:

Aggressive =%

Passive =%