1. What is the expected return and variance of a portfolio invested 25% each in A, B, C and D? Will the resulting portfolio structure bring you a higher expected return?
2. How should you change the shares of securities A, B, C and D in your portfolio in order to minimize risk and maximize expected returns? Explain your answers.

A B D E F G H J 2. ty of Stock 1 Question 2 2 State of Probabili 3 Economy 4 Boom 20% 5 Good 40% 6 Poor 20% 7 Bust 20% Rate of Return Stock A Stock B Stock C Stock D -15% 25% 33% -20% -5% 12% 15% -5% 15% -7% -5% 12% 31% -12% -9% 34% Dollar invested 30,000 45,000 B C D 25,000 00 9 10 11 A B D E F G H J 2. ty of Stock 1 Question 2 2 State of Probabili 3 Economy 4 Boom 20% 5 Good 40% 6 Poor 20% 7 Bust 20% Rate of Return Stock A Stock B Stock C Stock D -15% 25% 33% -20% -5% 12% 15% -5% 15% -7% -5% 12% 31% -12% -9% 34% Dollar invested 30,000 45,000 B C D 25,000 00 9 10 11