There are three securities in the market. The following chart shows their possible payoffs: state Probability of Outcome . 16 .34 Return on Security i .2e7 . 157 . 107 .257 Return on Security 2 .2e7 . 107 . 157 .257 Return on Security 3 .857 . 107 - 157 . 16 .207 a-1. What is the expected return of each security? (Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Security 1 Security 2 Security 3 Expected return 13.20 % 13.20 % 13.20 % a-2. What is the standard deviation of each security? (Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Security 1 Security 2 Security 3 4.71 % b-1. What are the covariances between the pairs of securities? (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answers to 5 decimal places, e.g., 32.16161.) Security 1 & 2 Security 1 & 3 Security 2 & 3 Covariance 0.001375 -0.002225 -0.601375 b-2. What are the correlations between the pairs of securities? (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Correlation 0.6180 Security 1 & 2 c-1. What is the expected return of a portfolio with half of its funds Invested in Security 1 and half In Security 2? (Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return Security 1 & 2 c-2. What is the standard deviation of a portfolio with half of its funds Invested in Security 1 and half In Security 2? (Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Security 1 & 2 d-1. What is the expected return of a portfolio with half of its funds Invested in Security 1 and half In Security 3? (Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return Security 1 & 3 d-2. What is the standard deviation of a portfolio with half of its funds Invested in Security 1 and half in Security 3? (Leave no cells blank - be certain to enter "0" wherever required. Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Security 1 & 3 e-1. What is the expected return of a portfolio with half of its funds Invested in Security 2 and half In Security 3? (Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) Expected return Security 2 & 3 e-2. What is the standard deviation of a portfolio with half of its funds Invested in Security 2 and half in Security 3? (Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Security 2 & 3 Standard deviation %
