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Pierre is considering a portfolio with 50% invested in Stock A and 50% invested in Stock B. These are the expected returns Economic probability Return

Pierre is considering a portfolio with 50% invested in Stock A and 50% invested in Stock B. These are the expected returns

Economic probability Return on Return on Return on

state of state Stock A Stock B Portfolio

poor .30 -15% 25%

fair .50 10% 5%

boom .20 30% -5%

a. what is the return on the total portfolio?

b. What is the variance and standard deviation of the portfolio?

c Are the two stock positively or negatively correlate? why?

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