There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $74. The price of Stock A next year will be $63 if the economy is in a recession, $86 if the economy is normal, and $96 if the economy is expanding. The probabilities of recession, normal times, and expansion are .19, .61, and .20, respectively. Stock A pays no dividends and has a correlation of .69 with the market portfolio. Stock B has an expected return of 13.9 percent, a standard deviation of 33.9 percent, a correlation with the market portfolio of .23, and a correlation with Stock A of .35. The market portfolio has a standard deviation of 17.9 percent. Assume the CAPM holds.

What is the return for each state of the economy for Stock A?

What is the expected return of Stock A?

What is the variance of Stock A?

What is the standard deviation of Stock A?

What is the beta of Stock A?

What is the beta of Stock B?

What is the expected return of a portfolio consisting of 65 percent of Stock A and 35 percent of Stock B?

What is the standard deviation of a portfolio consisting of 65 percent of Stock A and 35 percent of Stock B?

What is the beta of the portfolio in part (b)?