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Ms. Maple is considering two securities, A and B, and the relevant information is given below: State of the economy Probability Return on A(%) Return

Ms. Maple is considering two securities, A and B, and the relevant information is given below:

State of the economy

Probability

Return on A(%)

Return on B(%)

Bear

0.4

3

6.5

Bull

0.6

15

6.5

a. Calculate expected return and standard deviation of two securities. b. Suppose Miss Maple invested $2,500 in security A and $3,500 in security

B. Calculate the expected return and standard deviation of her portfolio.

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