Question 2: Today, the stock price of company A is $40 and the stock price of company B is $50. You estimate that the two stocks will have the following prices one year from now, conditional on the state of the economy:

Question 2: Portfolio Risk and Return Today, the stock price of company A is $40 and the stock price of company B is $50. You estimate that the two stocks will have the following prices one year from now, conditional on the state of the economy: State ofEconom Probabilit l_ Please assume that both stocks will not pay any dividends in the next year and consider the one-year net returns of each stock. a. Calculate the expected return of each stock. b. Calculate the standard deviation of each stock return. c. Calculate the covariance between returns of stocks A and B. d. A portfolio AB containing stocks A and B has an expected return of 12.8%. What is the standard deviation of the return of this portfolio? e. Suppose you buy 100 shares of stock A and 10 shares of stock B. What is the expected return of this portfolio? f. Is it possible to construct a portfolio containing A and B that has an expected return of 20%? Please be specic. g. Is it possible to construct a riskless portfolio containing A and B? Please be specic