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Use the following information to answer question 1--7. Suppose there are three potential states of the economy for next year: good, normal, and bad. Each
Use the following information to answer question 1--7. Suppose there are three potential states of the economy for next year: good, normal, and bad. Each state has equal probability to occur, that is, the probability is 1/3 for all of them. Returns of asset A and B in each state are given in the following table. good normal bad 0.200 0.08 -0.01 0.15 0.10 -0.04 Question 6 1 pts You plan to invest in assets A and B, and hope your portfolio to have an expected return of 8.6%. How should you allocate your money on A and B? O 30% in A and the rest in B. O 14% in A and the rest in B. 0 86% in A and the rest in B. 0 80% in A and the rest in B. 0 40% in A and the rest in B. Question 7 1 pts What is the standard deviation of the portfolio you formed in the previous question? 08.49% O 8.41% 0 8.6% 08.04% 09.24%
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