Given the following table, answer the questions:
State of Economy Probability Possible Return for Stock A
Boom 20% 16%
Average 70% 7%
Recession 10% -5%
A. What is the expected return for Stock A?
B. What is the standard deviation of Stock A’s returns?
C. What is the coefficient of variation, and what does this mean?
D. Suppose Stock B has an expected return of 13%. What is the expected return of a portfolio if you have $3500 invested in A and $6500 invested in B?