State of Economy		Prob. of State of Economy		Rate of Return if State occurs
				Stock A	Stock B	Stock C
Boom		0.75		0.07	0.15	0.33
Bust		0.25		0.13	0.03	0.06

- Portfolio expected return:

State	pi	RP,i	pi X RP,i
1	0.75
2	0.25

b. Variance of a portfolio invested 20% each in A and B and 60% in C

- Portfolio expected return for each state:

- Portfolio expected return and variance:

State	pi	RP,i	pi X RP,i	RP,iE(RP)	[RP,iE(RP)]2	pi X [RP,iE(RP)]2
1
2