Assume that you recently graduated with a major in finance, and you just landed a job in the trust department of a large regional bank. Your first assignment is to invest $100,000 from an estate for which the bank is trustee. Because the estate is expected to be distributed to the heirs in approximately one year, you have been instructed to plan for a 1-year holding period. Furthermore, your boss has restricted you to the following investment alternatives, shown with their probabilities and associated outcomes.

Estimated Returns on Alternative Investments

State of the Economy Probability T-Bills High Tech Collections U.S. Rubber Market Protfolio Two-Stock Portfolio

Recession 0.1 8.0% 22.0% 28.0% 10.0% 13.0% _____

Below Average 0.2 8.0 2.0 14.7 10.0 1.0 _____

Average 0.4 8.0 20.0 0.0 7.0 15.0 _____

Above Average 0.2 8.0 35.0 10.0 45.0 29.0 _____

Boom 0.1 8.0 50.0 20.0 30.0 43.0 _____

r _____ _____ _____ _____ _____ _____ _____

_____ _____ _____ _____ _____ _____ _____

CV _____ _____ _____ _____ _____ _____ _____