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There are two assets and three states of the economy, answer questions 32 to 34.   State...

There are two assets and three states of the economy, answer questions 32 to 34.  

State of Economy

Probability of State of Economy

Return of Stock A if State Occurs

Return of Stock B if State Occurs

Recession

0.30

-0.10

0.08

Normal

?

0.20

0.15

Boom

0.20

0.30

0.20
  1. Suppose you have $50,000 total. If you put $30,000 in Stock A and the remainder in Stock B, what are the portfolio returns in each state?
  1. Suppose you have $50,000 total. If you put $30,000 in Stock A and the remainder in Stock B, what will be the expected return of your portfolio?

  1. Suppose you have $50,000 total. If you put $30,000 in Stock A and the remainder in Stock B, what will be the standard deviation of your portfolio?
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