Q: Consider the following probability distribution for stocks A and B:

1. The expected rates of return of stocks A and B are _____ and _____, respectively. (2 Marks)
2. The standard deviations of stocks A and B are _____ and _____, respectively. (2 Marks)
3. What is the coefficient of correlation between A and B ? (2 Marks)
4. If you invest 35% of your money in A and 65% in B, what would be your portfolio's expected rate of return and standard deviation? (4 Marks)

State 1 2 3 4 5 Probability Return on Stock A Return on Stock B 0.15 8% 8 0.20 13% 70% 0.15 12% 0.30 14% 9% 0.20 16% 11% 6 State 1 2 3 4 5 Probability Return on Stock A Return on Stock B 0.15 8% 8 0.20 13% 70% 0.15 12% 0.30 14% 9% 0.20 16% 11% 6