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Problem 1. Assume you have invested $55,000 in the stock of ABC Industries and $20,000 in the stock of Southern Enterprises. Their prospective returns are
Problem 1. Assume you have invested $55,000 in the stock of ABC Industries and $20,000 in the stock of Southern Enterprises. Their prospective returns are listed below: State of the Economy Probability ABC Industries Southern Enterprises Expansion 25% 30% 25% Normal 50% 21% 15% Recession 25% 2% -4% a. Determine the expected return for ABC Industries and Southern Enterprises. b. Determine the expected return of the portfolio. c. Determine the standard deviation of the portfolio. d. In general, what is the correlation of the two stocks (ie, positive or negative)? What is their general correlation with the state of the economy? **Format values correctly %, $) to two decimal places for full credit
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