1. 1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return? The variance? The standard deviation?

   2. If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio?

State of Economy Probability of state of Economy Stock A Stock B Stock C

Boom .25 .02 .32 .60

Normal .60 .10 .12 .20

Bust .15 .16 -.11 -.35