You have done your research for the following investments and your friend has provided their expectations for the markets for next year.

Probability Stock A Stock B TSX

Boom 0.3 30% -9% 18%

Normal 0.4 16% 12% 10%

Recession 0.3 -10% 20% -10%

Calculate the covariance and correlation of the returns for stock A and stock B.

Calculate the covariance and correlation of the returns for stock A and the TSX.

Calculate the covariance and correlation of the returns for stock B and the TSX.

Calculate the beta of Stock A.

Calculate the beta of stock B.

Calculate the beta for the TSX.

Using an excel spreadsheet and the calculations you have done above, make a spreadsheet that provides the expected returns and the risk for a portfolio that invests in stock A and stock B. Prepare the calculations using 4% increments in the weights.

Using the excel spreadsheet and the information from part m, make a graph of your results.