Question 3: 6 points Chapter 6 CL0 3 Ahmed Al Baddawi is an amateur investor who had out in $6,300 in Stock 1 shares and $14,700 in Stock 2 shares. Assume that the market can have five states: very good, good, neutral, bad and very bad. It is also given that the beta of Stock 1 is 2.3, and the beta of Stock 2 equals 1.1. The probabilities for each state and the returns of two shares are given in the table below: State of the Stock 1: Probability of of Occurrence Stock 2: STU Economy Very good PQR 14% 11% 7% Good 10% 30% 20% 30% 8% 6% Neutral 8% Bad 5% 5% Very bad 10% -2% 3% Note: If your answer is in percentage points, round to two decimal points. If your answer is in decimals, round to four decimal points. a. (1 point) Calculate the expected return for each stock separately. Stock 1: Stock 2: b. Estimate the standard deviation of each stock separately. (1.5 points) Stock 1: Stock 2: Apply the coefficient of variation to justify which stock is a better investment. (1 point) d. Calculate the expected return on a portfolio consisting of these two stocks. (1 point) e. Determine the risk of a portfolio consisting of these two stocks AND interpret its meaning. (1.5 points)