An approach to portfolio optimization is the scenario approach. In this, we identify a few scenarios (less than 10, say) that might occur during the next year. For each scenario we estimate the return on each investment. Then, we estimate the expected return and risk of the portfolio. The Sentinel Finance Company, a small firm, wishes to invest in four stocks. The cost of each stock ($ per share) and the forecasts of the return ($ per share) for each stock made by the company's five analysts are given in the following table:

Stock 1 Stock 2 Stock 3 Stock 4 Cost $30.00 $45.00 $27.00 $53.00 Forecast 1 3.00 13.00 4.00 25.00 Forecast 2 1.00 4.50 . 60 15.00 Forecast 3 2.75 1.75 2.75 20.00 Forecast 4 4.50 5.00 1.90 5.00 Forecast 5 3.25 2.75 3.75 35.00 Expected return 2.90 5.40 2.60 20.00 S/share)