Question 12 Returns on stock A and stock B over the next year depend on the state of the economy. State of Economy Probability Realized returns of stock A Realized returns of stock B Recession 0.1 -0.20 -0.30 Normal 0.6 0.10 0.02 Expansion 0.3 0.15 0.30 You want to construct a portfolio C using stock A and stock B in order to attain a portfolio expected return of 9.5% What is the Sharpe ratio (average returns divided by standard deviation) of stock A, stock B, and portfolio C? OSR of stock A = 0.87 SR of stock B = 0.41 SR of portfolio C = 1.03 OSR of stock A = 0.82 SR of stock B = 0.52 SR of portfolio C = 0.62 OSR of stock A = 0.95 SR of stock B = 0.43 SR of portfolio C = 0.74 OSR of stock A = 0.77 SR of stock B = 0.51 SR of portfolio C = 1.2