Risk and Return:

You have recently been interested in 2 stocks: A and B. You have a projection for the returns for both of them:

States	Probability	A	B
Boom	20%	45%	30%
Normal	50%	25%	15%
Bust	30%	-25%	-10%

Please answer the following questions, and clearly show your calculations:

1. Whats the expected return for each stock?

2. Whats the volatility (standard deviation) for each stock?

3. If you decided to put both stocks in your portfolio with an equal weight (0.5 and 0.5), whats your portfolio expected return?

4. Whats your portfolio volatility?