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The following table gives the distribution of future return on A and B based on historical data. State Ret on A Ret on B 1

The following table gives the distribution of future return on A and B based on historical data.

State Ret on A Ret on B

1 0.20 0.15

2 -0.04 0.00

3 0.17 0.07

4 0.11 0.22

If you are asked to put your money only in ONE stock, what will be the return and risk of your optimal portfolio? What if you are allowed to put your money in ALL stocks?

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