You would like to invest in two shares A and B. The return on these shares over the next year depends on the state of economy, which will be described as "Boom", "Normal", "Slow" and "Recession". The table below shows the probability of each of these states of economy, and the expected return on each share given each possible state of the economy. The correlation coefficient between shares A and B is 0.5.

State of the economy Probability A Return B Return

Boom 0.20 0.25 0.21

Normal 0.40 0.16 0.12

Slow 0.25 0.10 0.08

Recession 0.15 - 0.06 0.05

a.What is the expected return on A and B shares?

b.What is the standard deviation of A and B shares?

c.What is the expected return on portfolio comprised of 55% invested in share A and the balance in share B?

d.What is the standard deviation on portfolio comprised of 55% invested in share A and 45% invested in share B?