QUESTION 2 The probability distributions of returns for Stock A and Stock B are given below: State of Economy Probability Stock A Stock B Bull 0.3 20% 5% Bear 0.7 12% 10%

REQUIRED a. Calculate the expected returns for Stock A and Stock B. [5 marks] b. Calculate the variances of returns for Stock A and Stock B. [5 marks] c. Calculate the correlation of Stock A with Stock B. [5 marks] d. Based on the correlation obtained in part (c), calculate the expected return and standard deviation of the minimum variance portfolio.