The following probability distribution outlines the projected returns for a series of economic states over the next year for two stocks, X & Y, along with the probability of these states occurring.

State	Pi	Ri Stock X	Ri Stock Y
Boom	.40	13%	7.50%
Steady Growth	.50	10%	6%
Recession	.10	-5%	2%

a. Calculate the Expected returns of assets X and Y.

b. Calculate the standard deviation of returns of assets X and Y.

c. Given a correlation coefficient of +0.94 between X and Y calculate the expected returns AND standard deviation of a portfolio that includes 60% of X and 40% of Y.

d. Graphically illustrate the return and risk combinations that include two assets (e.g., stocks X and Y). Briefly explain the efficient frontier and highlight the portfolios that a rational investor would never invest in.