You have a 150 million portfolio invested in 3 stocks stocks M, A, D. Your portfolio has a proportion of 45%,25%,30% for stocks M, A, D, respectively.

There is a 50% chance that economy remains in status quo thus the interest rate for the next 5 years will be the same at 12% annually. A 30% chance of decreasing economy which makes the interest rates to be more volatile (see Table 1), and 20% probability for improved economy in the next 5 years, thus increasing the investment rate (see Table 2).

Table 1
Period	Interest Rates
1-year	6%
3-year	10%
1f2	10.5%
2f2	9%
1f4	9.5

Table 2
Period	Interest Rates
2-year	13.5%
4-year	14.8%
1f4	15.9%

1. Calculate the following for each stock:

1. Expected value after 5 years of investing?
2. Expected rate of return given the probability of economic movement?
3. Standard Deviation

2. Calculate the correlation of the stocks.

Stocks	M	A	D
M	1.0
A		1.0
D			1.0

3. Calculate the portfolio performance:

1. Expected Rate of Return
2. Standard Deviation