Problem #3 (11 Marks) A stock has the following prices and dividends. Price (at end of year) Year Dividend $52.50 $55.50 1 2 3 4 $53.25 $56.75 $0.25 $0.35 $0.30 $0.36 What is the arithmetic and geometric average return on this stock? Problem #4 (8 Marks) An investment firm is considering a portfolio of equal weighting in a cyclical stock, CDN and a countercyclical stock, NNP. The firm has $20,000 to invest. It is expected that there will be three economic states: Good, Average, and Bad, each with equal probability of occurrence. The table below shows the percentage return for stocks CDN and= NNP under the different economic states. Using this information please answer the following questions: State of economy Return for stock CDN 12% 5% 1% ?? % 4.55% Good Average Bad Expected return Standard deviation Return for stock NNP -8% 2% 14% 2.67% ?? % a. What is the expected return for stock CDN? (2 marks) b. What is the standard deviation of the returns of stock NNP? (4 marks) c. What is the expected return of this portfolio? (2 marks) Problem #5 (5 Marks) You have $200,000 to invest in a portfolio containing Stock ABC and Stock DEF. Your goal is to create a portfolio that has an expected return of 10.4125 percent. If Stock ABC has an expected return of 13.5 percent and Stock DEF has an expected return of 8.75 percent, how much money will you invest in stock DEF