3. Set (B) [10 Marks]

Based on the scenario below, what is the expected return for a portfolio with the following return profile?

	Bear	Normal	Bull
Probability	0.4	0.2	0.4
Rate of return	-20%	10%	20%

Answer the following questions based on below table:

	Bear	Normal	Bull
Probability	0.4	0.2	0.4
Stock X	-10%	15%	40%
Stock Y	-12%	20%	20%

1. What are the expected returns for stock X and Y? [ 3 Marks]
2. What are the standard deviations of returns on stock X and Y? [ 3 Marks]
3. Assume that of your Rs 1,00,000 portfolio, you invest Rs 80000 in Stock X and rest in Stock Y. What is the expected return on portfolio? [ 4 Marks]