Use the following information to answer the questions below:

Scenario Probability Rate of Return

Boom 0.40 28%

Normal 0.55 14%

Recession 0.05 -50%

A. Calculate the standard deviation of the returns on this stock?

B. What does your answer about the standard deviation mean for the stock return?

C. Calculate the rate of return of a portfolio if 60% of the portfolio is composed of the stock above and the rest of the portfolio is composed of bonds with an expected rate of return of 8%