Problem:
Use the following info to answer the 2 questions:
state of the economy price of stock a 1 year later probability
recession 40 0.1
normal 55 0.8
expansion 60 0.1
current price of stock a - 50$
expected return of stock B - 0.09
standard deviation of returns for stock b - 0.12
correlation between returns for stocks A and B - 0.6
variance of returns for A - 0.0096
a) What is the expected return for a portfolio that is made up of 70% in stock A and the rest in stock b?
b) What is the standard deviation for a portfolio that is made up of 70% in stock A and the rest in Stock b?