Part 1) Given the following conditions, what is the standard deviation of returns?

State of the Economy	Probability	Returns
Booming	20%	30%
Stable	60%	10%
Recessionary	20%	-5%

A) 16.14%

B) 24.84%

C) 14.34%

D) 17.56%

E) 10.21%

Part 2) Marco Industrials and Rochelle Enterprises recently issued bonds with the following characteristics:

Bond Issuer	Par Value	Coupon Rate	Original Maturity	Bond Rating
Marco Industrials	$1,000	4.5%	10 years	AA
Rochelle Enterprises	$1,000	5.8%	25 years	BBB

Which of the following is consistent with the differences in rates?

a)	Differences in inflation expectations.
b)	Lower maturity risk for Rochelle Enterprises.
c)	Greater liquidity risk for Marco Industrials.
d)	Greater default risk for Rochelle Enterprises.