Question 4 The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Boom Normal Recession Dividend Stock Price $2.00 $1.00 $0.50 $50 $43 $34 a) Calculate the expected holding-period return and standard deviation of the holding- period return. Assume that all three scenarios are equally likely. b) Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on t-bills is 4%.

The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: a) Calculate the expected holding-period return and standard deviation of the holdingperiod return. Assume that all three scenarios are equally likely. b) Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on t-bills is 4%