State of the Economy Probability Treasury Bills Kreators Inc Biggie Corp Car Part Holdings

Recession 0.1 3% -30% -10% 25%

Below Average 0.2 3% -15% -3% 12%

Average 0.3 3% 8% 5% 8%

Above Average 0.2 3% 22% 8% 6%

Boom 0.2 3% 40% 12% 3%

1. Calculate the expected return, standard deviation, and coefficient of variation for Treasury Bills, Kreators Inc, Biggie Corp and Car Part Holdings

2. If you create an equally weighted portfolio composed of these four investments, what would your expected return be for each state of the Economy? That is, if you created a portfolio that is 25% Treasury Bills, 25% Kreators, 25% Biggie, and 25% Car Part Holdings, what return would you expect for each state of the economy?

3. Calculate the expected return, standard deviation, and coefficient of variation for the equally weighted portfolio described in #2.

4. If you wanted to reduce the standard deviation of the portfolio by removing one investment, which investment would you choose to remove? Why?