) Consider the following situation: State of Economy Probability of State of Economy Returns if State Occurs Stock A Stock B Stock C Boom 50% 30% 20% 10% Average 30% 10% 10% 10% Recession 20% -30% 10% 10% The expected return on the market portfolio is 12% and the US Treasury bill yields 2%. The capital market is currently in equilibrium. (a) Which stock has the most total risk? Provide all the steps and equations.

(b)Which stock has the most systematic risk? Explain why. Provide all the steps and equations.

(c) Which stock is the riskiest among the three stocks? Which stock is the safest among the three stocks? Explain why.

(d) What is the standard deviation of a portfolio which is comprised of $8,400 invested in stock A, $3,600 in stock B, and $3,000 in Stock C?