• Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

State of Economy	Probability of State of Economy	Security Return If State Occurs
Recession	.30		-9	%
Normal	.50		15
Boom	.20		24

Standard deviation

%

2.		Security Returns If State Occurs
State of	Probability of
Economy	State of Economy	Roll	Ross
Bust	.30	-16	%	20	%
Boom	.70	27		7

Calculate the standard deviations for Roll and Ross by filling in the following table (verify your answer using returns expressed in percentages as well as decimals): (Negative amounts should be indicated by a minus sign. Round your Economy and Standard deviation answers to 2 decimal and other answers to 4 decimal places. Omit the "%" sign in your response.)

State of Economy	Probability of State of Economy	Return Deviation from Expected Return	Squared Return Deviation	Product
Roll
Bust
Boom
			2 =
Ross
Bust
Boom
			2 =

	Standard deviations
Roll	%
Ross	%
3.
		Security Returns If State Occurs
State of	Probability of
Economy	State of Economy	Roll	Ross
Bust	.30	-16	%	20	%
Boom	.70	27		7

Calculate the standard deviations for Roll and Ross by filling in the following table (verify your answer using returns expressed in percentages as well as decimals): (Negative amounts should be indicated by a minus sign. Round your Economy and Standard deviation answers to 2 decimal and other answers to 4 decimal places. Omit the "%" sign in your response.)

State of Economy	Probability of State of Economy	Return Deviation from Expected Return	Squared Return Deviation	Product
Roll
Bust
Boom
			2 =
Ross
Bust
Boom
			2 =

4.	Standard deviations
Roll	%
Ross	%
		Security Returns If State Occurs
State of	Probability of
Economy	State of Economy	Roll	Ross
Bust	.30	-18	%	19	%
Boom	.70	29		7

Calculate the expected return on a portfolio of 65 percent Roll and 35 percent Ross by filling in the following table: (Round your answers to 4 decimal places. Negative answers should be indicated by a minus sign. Omit the "%" sign in your response.)

State of Economy	Probability of State of Economy	Portfolio Return If State Occurs	Product
Bust	.30
Boom	.70
			E(RP) =		%

5. Consider the following information:

		Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy	Stock A	Stock B	Stock C
Boom	.20	.20	.33	.33
Good	.15	.15	.25	.15
Poor	.20	.05	-.06	-.07
Bust	.45	-.06	-.26	-.09

a.	Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Expected return

%

b-1.	What is the variance of this portfolio? (Round your answer to 5 decimal places.)

Variance of this portfolio

b-2.	The standard deviation? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Standard deviation

%

6. Refer to the table below.

	3 Doors, Inc.		Down Co.
Expected return, E (R)	19	%		7.5	%
Standard deviation,	34			22
Correlation			.43

Using the information provided on the two stocks in the table above, find the expected return and standard deviation on the minimum variance portfolio. (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Expected return	%
Standard deviation	%