Question 1: Solve the following

a) You have invested in an equally weighted portfolio of stock A and stock B. The expected returns of the stocks are below:

	Return in a Boom Period	Return in a Recession
Stock A	40%	-25%
Stock B	10%	-15%

What is the expected return of the portfolio if there is a 30% chance of recession? Answer: 12%

B) You purchase 1,000 shares of Amazon and 500 shares of Tesla. The price of Amazon is

	Return in a Boom Period	Return in a Recession
Amazon	40%	-10%
Tesla	50%	-35%

What is the expected return of the portfolio if there is a 60% chance of recession? Answer: 4%

Please show all steps, include formulas and no excel please