There are three states of economy and you are given the following probabilities and returns for each stock for each state of economy. You invest 65% in stock X and 35% in stock Y. The betas for each stock are also given below.

1. Calculate the expected return of the portfolio.
2. Calculate the standard deviation of the portfolio.
3. Calculate the beta of the portfolio.
4. Is the systemic risk of the portfolio is more or less than the market?

State of Probability of EconomyEconomy Returns if State Occurs State of Stock X 20% 10% 596 Stock Y Boom Normal Recession 25% 50% 25% 18% 8% 3% Stock Portfolio Weights Beta 1.05 0.70 65% 35%