6. TWO PART QUESTION

Given the returns, risk, and correlation: E (r) o pSB Portfolio S 0.115 0.42 -0.43 Portfolio B 0.08 0.11 Risk-free 0.055 What is the weight of Portfolio B for the optimal portfolio? O 0.8650 0.8199 0.9589 O 0.9954 0.9085 Given the following probabilities and expected returns: Scenario Probability E(r) S E(r) B Severe recession 0.1 -0.25 -0.11 Mild recession 0.2 -0.08 0.11 Normal Growth 0.45 0.12 0.08 Boom economy 0.25 0.27 -0.07 What is the expected return for Fund S given the scenarios? O 0.0932 O 0.0758 O 0.0892 O 0.0840 O 0.0805