Economic State Probability Return Stock A Return Stock B

Recession 0.10 2% -30%

Normal 0.50 10% 18%

Boom 0.40 15% 31%

1. Calculate the expected return for stocks A and B.

1. Calculate the variance and standard deviation of returns for stock A and B.

1. Calculate the covariance of returns between the returns of stocks A and B.

1. Calculate the coefficient of correlation between the returns to stocks A and B.

Please show calculations and formulas