Stock analysts estimate the Bank of America stock (BOA), and Citigroup stock (CITI) have the following probabilities and returns depending on the state of the economy.

Economy State Probability Return CITI Return BOA Good 0.2 12% 18% Normal 0.6 10% 12% Bad 0.2 -2% 8%

1) For Stock CITI, what is the expected return? What is the standard deviation of return? (6 points)

2) The C.D. account offers a risk-free rate 3%. What is the correlation coefficient between the returns of CITI stock and C.D.? (3 points)

3) For Stock BOA, the expected return is 12.4%, the standard deviation of return is 3.2%. What is the correlation coefficient between the returns of BOA and CITI? (5 points)