Question 5 (20 marks) (a) There is a certain stock that had returns of 11%, 10%, -5%, 15% and 18% for the last five years. What were the arithmetic average and standard deviation of the stock's returns for the five-year period? (5 marks) (b) What is the expected return and standard deviation for the following stock? (6 marks) State Recession Normal Boom Probability 0.20 0.50 0.30 Rate of return 0.05 0.15 0.20 (C) Stock A has a beta of 1.12 and an expected return of 10.8%. A risk-free asset currently earns 2.7%. You are considering a portfolio of only Stock A and risk-free asset. (i) What must the expected return on the market be? (2 marks) (ii) What is the expected return on a portfolio that includes 30% invested in Stock A and the rest in the risk-free asset? (3 marks) (iii) If a portfolio with Stock A and risk-free asset now has an expected return of 10%, compute the weighing of Stock A in the portfolio and the portfolio beta. (4 marks)