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Suppose there are three potential states of the economy for next year: good, normal, and bad. Each state has equal probability to occur, that is,

Suppose there are three potential states of the economy for next year: good, normal, and bad. Each state has equal probability to occur, that is, the probability is 1/3 for all of them. Returns of asset A and B in each state are given in the following table.

Good Normal Bad

A 0.20 0.08 -0.01

B 0.15 0.10 -0.04

Find out the expected return of a portfolio with equal weight invested in A and B.

Find out the standard deviation of a portfolio with equal weight invested in A and B.

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