Question 3: Ms. Deen is considering two securities A and B, and the relevant information is given below:

State of the Economy

Bear

Bull

Probability

Returns on Security A

Returns on Security B

Bear

0.6

3.5 %

8.0 %

Bull

0.4

15.0 %

10.0 %

Required:

a.Explain what is Bear and Bull Economy.

b.Calculate the expected rate of return, standard deviation, and coefficient of variations of the two securities separately.