Refer to table 10.2

a. Construct an equal-weighted (50/50) portfolio of Investments B and C. What is the expected rate of return and standard deviation of the portfolio. Explain your results.

b. Construct an equal an equal-weighted (50/50) portfolio of Investments B and D. What is the expected rate of return and standard deviation of the portfolio. Explain your results.

				Rate of return if state occurs
Economic state	Probability of occurrence	A	B	C	D	AB	AC	AD
Very poor	0.1	-0.1	0.3	-0.25	0.15	0.1	-0.175	0.025
Poor	0.20	0	20	-5	10	10	-2.5	5.0
Average	0.40	10	10	15	0	10	12.5	5.0
Good	0.20	20	0	35	25	10	27.5	22.5
Very good	0.10	30	-10	55	35	10	42.5	32.5
	1.00
Expected rate of return		10.0%	10.0%	15.0%	12.0%	10.0%	12.5%	11.0%
Standard deviation		11.0%	11.0%	21.9%	12.1%	0.0%	16.4%	10.1%