FINA 351 HW 4 1. We form a portfolio with 30% invested in stock fund (S) and the remaining in a bond fund (B). Call it SnuB. The probabilities of the states and the returns for each state are shown below. Prob. S (%) B (%) SnuB (%) Severe Recession .05 -38 -10 Mild recession .15 -10 16 Normal growth .55 13 9 Boom .25 28 a. What are the expected return and SD of S and B funds? b. What are the state-by-state returns for SnuB? (Fill in the last column of the table above] c. What are the expected return and SD of SnuB? d. Collect the numbers calculated above in the table below. S% B % SnuB (%) Expected return SD e. Calculate the correlation coefficient between S and B