Solve the expected return and standard deviation

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Problem 1: Using the following information, calculate the expected return and standard deviation of a portfolio with 50 percent in ABC and 50 percent in DEF. Then calculate the expected return and standard deviation of a portfolio where you invest 40 percent in ABC, 40 percent in DEF, and the rest in T-bills with a return of 3.5 percent.

                            State of the Economy Probability          ABC Stock Return (%)             DEF Stock Return (%)

Depression                  0.1                                                    -5                                     -7

Recession                    0.2                                                    -2                                        2

Normal                        0.4                                                       5                                       6

Boom                          0.3                                                      10                                   15

Reference no: EM132939060

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