A stock of ABC Inc. is selling for 20 a share. Its annual dividend and endof-year price depending on business conditions are as follows:

Compute the following: 1) The expected holding period return.

2) Variance and standard deviation of the holding period return.

3) Expected return and standard deviation of a portfolio invested in 40% of ABC Inc. and 60% in Treasury Bills. The return of the T-Bill is 5%

Business Condition Probability Annual Dividend Boom Normal Growth Recession 0.25 0.5 0.25 2 1 0.5 End-of-Year Stock Price 30 25 15