Question 1 a. Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Allos Inc. are expected to follow the economy closely. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Depression -20% Recession Normal 30% Boom 50% 10% You are required to calculate: i. the expected returns [3 marks) ii. the Variance iii. the Standard deviation [3 marks) [3 marks) b. Suppose you invest 60% of your portfolio in Exxon Mobil and 40% in Coca Cola. The expected dollar return on your Exxon Mobil stock is 10% and on Coca Cola is 15%. The standard deviation of their annualized daily returns are 18.2% and 27.3%, respectively. Assume a correlation coefficient of 1.0. You are required to calculate: i. the portfolio expected returns [2 marks] ii. iii. the portfolio variance the portfolio standard deviation [2 marks] [2 marks]