9. Mr Y can invest in two financial securities, security A and security B. The table below gives a description of the states of the world, their respective probabilities and the return of each security in each state. State Probability of state Return of security A Return of security B Market Conditions Bear Normal Bull 20% 40% 40% -40% 0% 100% -6% 10% 20% a. Compute the expected return and the standard deviation of returns of a portfolio which places weight 30% in security A and 70% in security B. [15 marks] b. If the risk-free interest rate is RF=2%, estimate the optimal risky portfolio for the investor when short sales are allowed. [15 marks] C. Suppose that there is a third security, security C. Its return is -10% when the market is Bear, and 10% when the market is Normal. When the market is Bull, security C has 50% chance to give a return of 20% and 50% to give a return of 100%. Find the optimal risky portfolio for Mr Y. when he can invest in securities A, B, and C and short sales are allowed. [30 marks)