One share of stock Z is selling for $10. The stock has the following possible payoffs after one year:

Slump	Normal	Boom
$8	$12	$16

Assume equal probability for each state of the economy.

1) Calculate the expected return and the variance for return.

2) Suppose the risk free rate is 4%, and that stock Z is on the CML. Calculate the sharpe ratio for Z

3) Suppose stock Y has an expected return of 25% and variance of 0.16. Returns for Y and Z have a correlation coefficient of 0.1. Calculate the return and variance for a portfolio with 30% in Y and 70% in Z.