For next year, the expected returns of ABC Company stock, given the various predictions and their respective probabilities, would be summarized in the following table: Pessimistic Realistic Optimistic Expected return (%) 5.00% 8.00% 12.00% Probability 30% 60% 10%

a) Calculate the expected return of firm ABC. (2 points)

b) Calculate the standard deviation of returns for firm ABC. (2 points)

You have a sum of money that you plan to invest in the stock market. X Y Expected return (%) 12.00% 14.00% Standard deviation of return in (%) 1.8000% 1.3000%

c) If you wanted to invest in only one of these two securities, X or Y, which would you consider? Why? (2 points)

d) If you decide to invest 60% of your assets in stock X and 40% in stock Y, calculate the expected return and the standard deviation of your portfolio knowing that the correlation coefficient between the two securities is 0.73. (2 points)

e) If you decide to invest 45% of your assets in stock X and the rest in a risk-free Canadian government bond offering an annual return of 6%, calculate the expected return and the standard deviation of the returns of your new wallet. (2 points)

X Expected return (%) 12.00% Standard deviation of yield in (%) 1.8000%

Note: You must present the formulas used to arrive at the answer. In the case of using a financial calculator, you must mention the keys used to arrive at the answer.