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Consider the return behavior of the following two stocks: State of economy probability of state return on stock A return on stock B Recession .25

Consider the return behavior of the following two stocks:

State of economy	probability of state	return on stock A	return on stock B
Recession	.25	-4%	6%
Normal	.50	9%	8%
Boom	.25	15%	10%

a. Calculate the expected return and standard deviation of Stock A and Stock B.

b. Calculate the correlation coefficient between Stock A and Stock B

c. Suppose an investor formed a portfolio by placing $1,000 in Stock A and $1,000 in Stock B, calculate the expected return and standard deviation of this portfolio.

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