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2. Assume that you are considering investing in two risky assets with the following probability distribution. Stock State of the World Probability 1 0.30

2. Assume that you are considering investing in two risky assets with the following probability distribution. Stock State of the World Probability 1 0.30 2 FLI CEB Return (%) Return (%) 8 0 5 -1 5 2 0.30 0.25 0.15 a. Solve for the mean and risk on each of these assets, and the correlation between them. b. Suppose you are investing 25% of you investable income on FLI, determine portfolio return and portfolio risk. 3 4 2 4

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