Suppose there are three possible states of the economy and estimates of the rates of return for Stocks A and B in each state are given in the table below.

3. (12 points) Suppose there are three possible states of the economy and estimates of the rates of return for Stocks A and B in each state are given in the table below. Economy Probability Boom 0.1 20% -12% Normal 0.6 8% 4% Recession 0.3 18% -4% a. Find the expected return and the standard deviation of return of these two stocks. (4 marks) b. Consider a portfolio consists of 40% in stock A and 60% in stock B. i). What is the expected return of the portfolio? (4 marks) ii). What is the standard deviation of return of the portfolio? (4 marks)