The following are possible states of the economy and the returns associated with stocks A and B in those states.

State Probability Return on A Return on B

Good 0.3 24% 30%

Normal 0.4 36% 18%

Bad 0.3 48% -6%

Calculate

1) covariance

2) coefficient

3) the expected return of the portfolio consisting of A & B The weight in stock A is 60%.

4) the standard deviation of a portfolio comprised of stocks A and B. The weight in stock A is 60%.