Probability of State of Economy 20 State of Economy Boom Normal Recession Returns if State Occurs Stock A Stock B Stock C 18% 9% 6% 10% 8% 9% -8% 3% 1% 70 10 a. What are the mean and variance of Stock A? stock A, 20% in b. What is the expected return on a portfolio that is invested 40% B, and 40% in stock C? c. What is the expected return on a portfolio comprising $20,000 invested in Stock A, $50,000 invested in stock B, and $10,000 invested Stock C, if the economy is in the Recession state? d. According to capital markets theory, explain why the expected return for an asset is based only on its systematic risk and not the overall volatility