1. What is the portfolios expected return?
2. What is the variance of the portfolio and standard deviation?
3. If you have to choose only one type of securities (stock A, B, C or D) which one will you choose and why? To answer this question, you need to calculate the expected return for each stock and the standard deviation, and compare their values.
4. 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?
5. 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.

Question 2 Rate of Return State of Economy Probability of State of Economy Stock A Stock B Stock C Stock D Stock Dollar invested Boom Good Poor Bust 15% 60% 15% 10% 30% 12% 1% -20% 45% 10% -15% -30% 33% 15% -5% -9% -20% -5% 15% 35% A B D 25,000 10.000 35,000 30,000