Stock S is expected to return 12% in a boom and 6% in a normal economy....

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Stock S is expected to return 12% in a boom and 6% in a normaleconomy. Stock T is expected to return 20% in a boom and 4% in anormal economy.
There is a probability of 40% that the economy will boom;otherwise, it will be normal.
What is the portfolio variance and standard deviation if 30% ofthe portfolio is invested in Stock S and 70% is invested in StockT? Briefly discuss what this means to the stock.

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Standard deviation ofPortfolioPlease refer to See Answer

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Stock S is expected to return 12% in a boom and 6% in a normaleconomy. Stock T is expected to return 20% in a boom and 4% in anormal economy.There is a probability of 40% that the economy will boom;otherwise, it will be normal.What is the portfolio variance and standard deviation if 30% ofthe portfolio is invested in Stock S and 70% is invested in StockT? Briefly discuss what this means to the stock.