The returns on shares of Brison, Inc and Clayton Corp are predicted under the following economic conditions:

Economic Condition	Probability	Return on Brison	Return on Clayton
Recession	15%	20%	-30%
Stagnant	30%	0%	-5%
Moderate	35%	+10%	+10%
Boom	20%	+30%	+50%

a. Calculate expected returns of each stock? b. Calculate standard deviations of each stock? c. Comment on the correlation between the stocks.

Problem #1B

Create a portfolio with 25% invested in Brison and 75% invested in Clayton. (You can refer to the Excel file in Tools & Templates for Week 4 to supplement information available in the text)

a. Calculate the expected return of the portfolio? b. Calculate the standard deviation of the portfolio? c. Comment on the standard deviation of the portfolio compared with each stock.