There are three securities in the market. The following chart shows their possible payoffs: State 1 2 3 4 Probability of Outcome . 15 .35 .35 .15 Return on Security 1 .192 .142 .092 .042 Return on Security 2 .192 .092 .142 .042 Return on Security 3 .042 .092 .142 .192 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.) Expected return % Security 1 Security 2 Security 3 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.) Security 1 Security 2 Security 3 Standard deviation % % % 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.) Covariance Security 1 & 2 Security 1 & 3 Security 2 & 3 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 Security 1 & 2 Security 1 & 3 Security 2 & 3 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 "O" 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.) Standard deviation % Security 2 & 3
