2 (6) - The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows:

a. Calculate the expected holding-period return and standard deviation of the holdingperiod return. All three scenarios are equally likely.

b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%.

\begin{tabular}{lrc} \hline & Dividend & Stock Price \\ \hline Boom & $2.00 & $50 \\ Normal economy & 1.00 & 43 \\ Recession & .50 & 34 \\ \hline \end{tabular}