Consider the following two funds and their estimated returns under different states of the economy:

State of economy Probability Estimated Return (Fund A) Estimated Return (Fund B)

Great 30% 10% 25%

Average 30% 15% 11%

Poor 40% 20% 15%

Calculate the following:

a.Expected return for fund A and for fund B

b.Standard deviation of returns for fund A and fund B

c.Covariance between returns of fund A and fund B

d.Correlation between returns of fund A and fund B

If you invest $2,000 in Fund A and $6,000 in Fund B, Calculate the following:

1. Portfolios Expected Return
2. Portfolios Standard Deviation