Assume you bought 100 shares of X-Corp on January 1 for $43.75 a share and held the stock for one year. During that period of time you received $1.22 a share in dividends and sold the stock for $47 a share.

Assume you are now considering investing some money in 2 companies that you think will generate the following returns:

Company A

State of the economy	Probability of occurrence	% return given that state
Recession	30%	12%
Stable	60%	18%
Boom	10%	25%

Company B

State of the economy	Probability of occurrence	% return given that state
Recession	30%	9%
Stable	60%	14%
Boom	10%	16%

Which Stock provides the best investment based on the risk? Is there a reward tradeoff?

What is the expected return and standard deviation of a portfolio consisting of 40% invested in Stock A and 60% invested in Stock B given a correlation coefficient of .61?