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Consider the following information. State of Economy Security A Security B Portfolio Return Boom 12% 10%...

  1. Consider the following information.

State of Economy

Security A

Security B

Portfolio Return

Boom

12%

10%

Normal

7%

9%

Recession

-4%

-1%

  1. You allocate 40% in security A and 60% in security B to create a portfolio. What is the expected return of the portfolio? (10 points)

  2. What is the standard deviation of the portfolio? (10 points)

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