2. (10 pt each) The following tables show the information on the returns of two stocks S, and S2 depending on the states of economy. State of Probability of Return on Return on economy States Occurring Stock Si Stock S2 Bear 0.2 6% -4% Normal 0.5 8% 12% Bull 0.3 9% 30% (a) Calculate the expected return, variance and standard deviation for each stock. (b) Find the covariance and correlation between stocks S, and S2. (c) What is the minimum variance (for all possible returns) portfolio? (d) Suppose you have $5000 to invest. If stock S, costs $30 per share and S2 costs $55 per share, how would you distribute your investment to obtain the minimum variance portfolio from (c)? (e) To achieve 11% return, how should you form the portfolio? 2. (10 pt each) The following tables show the information on the returns of two stocks S, and S2 depending on the states of economy. State of Probability of Return on Return on economy States Occurring Stock Si Stock S2 Bear 0.2 6% -4% Normal 0.5 8% 12% Bull 0.3 9% 30% (a) Calculate the expected return, variance and standard deviation for each stock. (b) Find the covariance and correlation between stocks S, and S2. (c) What is the minimum variance (for all possible returns) portfolio? (d) Suppose you have $5000 to invest. If stock S, costs $30 per share and S2 costs $55 per share, how would you distribute your investment to obtain the minimum variance portfolio from (c)? (e) To achieve 11% return, how should you form the portfolio