Given the following:

State	Probability	End of Period Return
Stock A	Stock B
1	0.4	12%	14%
2	0.4	16%	15%
3	0.2	18%	16%

1. What are the expected return and standard deviation of the returns on stock B? (The expected return on A is 14.8%, and its standard deviation is 2.40%).

1. Which stock a risk averse investor should select? Why?

1. If you were to invest 30% of your money in A and the rest in B, what is the expected return and the standard deviation of your portfolio (Assume The covariance between A and B is zero)

1. If A has a beta of 0.8 and B has a Beta of 1.5, What is the required return on the portfolio from part c, if the risk free rate is 5% and the expected return on the market is 13%?