Question 7 options:

Use the following information to answer the two questions below.

State of Prob. of the Rate of return if state occurs

the economy state of economy Stock A Stock B

Boom 0.40 0.15 0.05

Bust 0.60 -0.05 0.05

You MUST use 4 digits in every calculation you do in order for your answer to be the same as the one in the system. Enter answer using 4 decimals. Do not use or enter the %. For example, if your answer is 3.480% enter 0.0350; if your answer is 0.12013 then enter 0.1201

What is the expected return of a portfolio with 75% in asset A and 25% in Asset B?

What is the variance of the portfolio with 75% in asset A and 25% in Asset B?