QUESTION 2 Share A and Share B has the following probability distribution of returns: Table 1 State of the Probability Return on Return on economy Share A Share B (p.a.) (p.a.) Boom 0.2 18% 25% 0.6 15% 17% Steady Slump 0.2 12% 10% Code: ECO302/ECC311 JUNE 2021 Page 3 of 2 (e) Using the data in Table 1 above, calculate the expected return and standard deviation of a portfolio composed of Share A (60 per cent) and Share B (40 per cent) [2]. Comment on the result as an illustration of the benefits of diversification [4]