4. There are two stocks in a portfolio. (1) when the future economy is in boom, stock 1 has expected return of 10% and stock 2 has expected return of 20%. (2) when the future economy is in recession stock 1 has expected return of -2% and stock 2 has expected return of -6%. Suppose the probability of boom state is 50% and the probability of recession state is 50%. If you allocate 40% on stock 1 and 60% on stock 2, what is the expected return and volatility of the portfolio?

There are two stocks in a portfolio. (1) when the future economy is in boom, stock 1 has expected return of 10% and stock 2 has expected return of 20%. (2) when the future economy is in recession stock 1 has expected return of-2% and stock 2 has expected return of-696. Suppose the probability of boom state is 50% and the probability of recession state is 50%. If you allocate 40% on stock 1 and 60% on stock 2, what is the expected return and volatility of the portfolio? 4