Problem:
State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return
Boom 0.75 0.04 0.03 0.26
Bust 0.25 0.12 0.18 -0.02
Based on the information provided above, what is the expected return on an equally weighted portfolio of the stocks listed and what is the standard deviation of a portfolio invested 25 percent in A and B and 50 percent in C?