Risk and Return Stock A and B have the following probability distributions of expected future returns: Expected Returns (E)ki Probability A B 0.10 0.20 + 5% + 0% 0.40 +15% +17% 0.20 +25% +34% 0.10 +40% +64% a. Calculate the expected rate of return for stocks A & B and their respective standard deviations b. Assume that a portfolio of stocks A & B is formed with the stock A representing 40% of the portfolio and stock B representing 60% of the portfolio. 1. What is the Covariance of stocks A & B? 2. What is the Correlation Coefficient of stocks A & B? 3. What is the Variance of the portfolio? 4. What is the Standard Deviation of the Portfolio? 5. What is the expected return of the portfolio (E)kp? c. Assume that the standard deviation of the market is 15.35%: 1. What is the Beta for stocks A & B? (Assume) a. . COVARAM - .029310 b. COVARB,M - 026598 2. What is the Beta of the portfolio? (Given the above proportions) d. Which stock is the riskier investment? Explain