B) What is the beta of stock A? [2 marks]

(2) Use the following information to answer questions Retums in the next period for two stocks, A and B, and the market portfolio M, are given by the following probability distribution: M State of Economy Boom Normal Recession Associated Rate of Retum the Probability of the A B State 0.25 40% 50% 0.5 0% 5% 0.25 -10% -5% 40% 15% -15% A) What is the standard deviation of the portfolio AB, which consists of 50% invested in A and 50% invested in B? The correlation coefficient between A and B is 1. [4 marks]