4.2 Table EconomicProbability ofRate ofReturn If Economic State Occurs StateOccurrenceAB C D

Very Poor0.10-10% 30% - 25% 15% Poor 0.200 20 -5 10 Average 0.4010 10 15 0 Good 0.20200 3525 Very Good 0.100-10 55 35 1.00 Expected Rate of return 10.0% 10.0% 15.0% 12.0% Standard deviation 11.0%11.0% 21.9% 12.1% Refer to table 4.2 a. Construct an equal-weighted (50/50) portfolio of Investments B and C. What is the expected rate of return and standard deviation of the portfolio? Explain your results.