Question

Use the following information to answer the two questions below. State of                               P

Use the following information to answer the two questions below.

State of                               Prob. of the                        Rate of return if state occurs

the economy                      state of economy                    Stock A         Stock B

Boom                                            0.40                             0.12               0.04

Bust                                               0.60                             0.02               0.04

You MUST use 4 digits in every calculation you do in order for your answer to be the same as the one in the system. Enter answer using 4 decimals. Do not use or enter the %. For example, if your answer is 3.48% enter 0.035; if your answer is 0.12013 then enter 0.1201

What is the expected return of a portfolio with 30% in asset A and 70% in Asset B?

What is the variance of the portfolio with 30% in asset A and 70% in Asset B?

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