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What is the expected return and standard deviation


State of the economy    Probability    End of Period Return
Stock A    Stock B

Good         0.3    20%    21%
Average    0.5    16%    15%
Bad           0.2    11%    7%

Question 1- What are the expected return and standard deviation of the returns on stocks A and B?

Question 2- What is the expected return and standard deviation of a portfolio of 20% in A and 80% in B?

Question 3- What is the expected return and standard deviation of a portfolio with 80% in A 4- Which one of the two portfolios should be selected by a risk averse investor? Why?

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Finance Basics: What is the expected return and standard deviation
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