Your portfolio only has two stocks. You invest 500,000 on stock A and 300,000 on stock B. Following is the information about the market and stocks. What is the required rate of the return on this portfolio? (Hint: S&P 500 index is a well-diversified market portfolio)

Risk free rate	2%
S&P index return	8%
Standard Deivation of Stock A	10%
Standard Deivation of Stock B	15%
Standard Deviation of S&P index	9%
Correlation between Stock A's return and S&P 500 return	0.65
Correlation between Stock B's return and S&P 500 return	0.50

A)	5.01%
B)	6.57%
C)	7.54%
D)	8.81%

Using the following information for Question 19 and 20.

Stock A has the following returns for various states of the economy:

State of the Economy Probability Stock A's Return

Recession 10% -30%

Below Average 20% -2%

Average 40% 10%

Above Average 20% 18%

Boom 10% 40%

19)What is Stock A's expected return

A) 5.85%.

B) 7.2%.

C) 8.2%.

D) 9.6%

20) What is Stock A's standard deviation?

A) 13.85%.

B) 14.42%.

C) 15.84%.

D) 16.98%