Question: Consider the following table which describes the probabilities of random outcomes for the returns on General Motors and Apple Stock.
State of world probability Return GM Return Apple
1 0.5 0.1 0.3
2 0.5 0.3 0.1
Calculate the expected return and standard deviation of the return for GM and Apple.
Consider a portfolio made up of these two stocks, with x being the fraction invested in GM. There is only one efficient portfolio. What is it, and why is it the only efficient portfolio?