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Steps with explanation please You have $40,000 to invest and you wish to divide this amount between three securities: $14,000 in the shares of Firm

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You have $40,000 to invest and you wish to divide this amount between three securities: $14,000 in the shares of Firm A, S18,000 in the shares ofFirm B, and the remaining part in the risk free asset. You collected the following information: Return if the state occurs State of the economye Boom Normal Bust Probability of Share A occurrence 0.20 0.50 0.30 Share B. Risk-free asset Inflation rat 0.25 0.21 0.08 0.40 0.17 -0.20 0.06 0.05 0.04 0.04 0.025 0.02 a) What is the expected return on the portfolio? (7 marks) b) What is the standard deviation of the return? (5 marks) c) What is the expected risk premium on the portfolio? (3 marks) d) What is the expected real return on the portfolio? (3 marks) Hint: Real return = Return-Inflation

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