You are thinking of investing in two sharesA and B. The returns on these shares over the next year depends on the state of the economy, which could be described as Boom, Average, Poor or Recession. The table below shows the probability of each of these states of the economy, and the expected return on each share given each possible state of the economy.

State of the economy	Probability	Share A return	Share B return
Boom	10%	15%	12%
Average	30%	6%	6%
Poor	40%	2%	-2%
Recession	20%	-10%	-8%

The correlation between returns on these two shares is 0.7. You construct a portfolio by investing 50% of your available funds in A and the balance in B. You will refer this portfolio as Portfolio C.

a) What is the expected return on Share A? (4 marks)

b) What is the variance of returns on Share A (provide 6 decimal places)? (4 marks)

c) What is the expected return on Share B? (4 marks)

d) What is the variance of returns on Share B (provide 6 decimal places)? (4 marks)

e) What is the expected return on Portfolio C? (4 marks)

f) What is the variance of returns on Portfolio C (provide 6 decimal places)? (4 marks)

State of the economy	Probability	Share A return	Share B return
Boom	10%	15%	12%
Average	30%	6%	6%
Poor	40%	2%	-2%
Recession	20%	-10%	-8%