1. Consider the following information:

				Rate of Return if State Occurs
State of Economy	Probability of State of Economy			Stock A			Stock B
Recession		.15			.04			.17
Normal		.55			.09			.12
Boom		.30			.17			.27

1. Calculate the expected return for each stock.
2. Calculate the standard deviation for each stock.

2. Consider the following information:

				Rate of Return if State Occurs
State ofEconomy	Probability of State ofEconomy			Stock A			Stock B			Stock C
Boom		0.65			0.07			0.15			0.33
Bust		0.35			0.13			0.03			0.06

1. What is the expected return on an equally weighted portfolio of these three stocks?
2. What is the variance of a portfolio invested 15% each in A and B and 70% in C?