2. a. Calculate the expected return and standard deviation of Securities A and B. State of Economy Probability Return on A Return on B Poor 25% 8% 0% Fair 50% 10% 20% Good 25% 12% 0% b. What is the covariance and correlation between the securities? c. If you invest 40% in A and 60% in B, what is the expected return and standard deviation of the portfolio? Use this to explain why it makes sense to diversify