2. Scenario Probability Expected Return A Expected Return B

1 20% 5% 40%

2 30% 10% 30%

3 30% 15% 10%

4 20% 20% -20%

Also assume that the variance of A = .00263 and variance of B = .042

Also the correlation coefficient between A&B = -.8

a. Calculate the expected returns for stocks A and B

b. Calculate the risk (standard deviations) for stocks A and B