Currently you are considering two stocks before you decide to invest. Since the market will volatile after the 14th General Election, you have the following data to analyse: State of economy Probability of occurrence Rate of return Stock Gogo (%) Rate of return Stock Lulu (%) Boom 0.1 Normal 0.6 Recession 0.3 The risk free-rate is 3% and market risk premium is 5%. Required: a. Calculate the expected returns and standard deviation for the two stocks. Suppose an investor has RM450,000, and invests RM200,000 in Stock Gogo and the remainder in Stock Lulu. Compute the expected return and standard deviation of the portfolio. From part a and b, which is the best choice to invest either in Stock Gogo. Stock Lulu or portfolio? Why? 5/4/