2. (24 points) Suppose that you are provided with the following information: State Probability RA RB 0.20 Boom Normal Recession Disaster 0.59 0.20 25% 15% 12% 10% 3% 1% -40% -10% 0.01 (a) (5 points) Compute expected returns and standard deviations for stocks A and B. (b) (5 points) Compute the correlation between stock returns. (c) (5 points) Suppose that market risk premium is 10% and risk-free rate is 2%. Compute market betas for stocks A and B. (d) (4 points) Which stock has more systematic risk? Total risk? (e) (5 points) Suppose that you have $1000 and you invest $400 in stock A and $600 in stock B. Compute mean, standard deviation, market beta of your portfolio