Problem N3 (32 points) Assume that Stocks X and Y are the only risky securities available in a hypothetical world. You know the following information about the possible returns offered by the two stocks next year. Assume T-Bill rate is 4%. Scenario War No war Probability 40% 60% Return from X 30% 5% Return from Y -10% 35% A. Compute the reward-to-variability ratios of stock X and stock Y? (14 points) B. What is the expected return and STD of the return of a portfolio (P) that consists of 50% stock X and 50% stock Y? (12 points) C. Suppose I have savings of $10,000, would like to invest $2,000 in T-Bill, $4,000 in stock X and the rest in stock Y. What will be the STD of my portfolio? (6 points) Problem N3 (32 points) Assume that Stocks X and Y are the only risky securities available in a hypothetical world. You know the following information about the possible returns offered by the two stocks next year. Assume T-Bill rate is 4%. Scenario War No war Probability 40% 60% Return from X 30% 5% Return from Y -10% 35% A. Compute the reward-to-variability ratios of stock X and stock Y? (14 points) B. What is the expected return and STD of the return of a portfolio (P) that consists of 50% stock X and 50% stock Y? (12 points) C. Suppose I have savings of $10,000, would like to invest $2,000 in T-Bill, $4,000 in stock X and the rest in stock Y. What will be the STD of my portfolio? (6 points)