Suppose you currently have a portfolio of three stocks, A, B,and C. You own 500 shares of A, 300 of B, and 1000 of C. Thecurrent share prices are $42.76, $81.33, and $58.22, respectively.You plan to hold this portfolio for at least a year. During thecoming year, economists have predicted that the national economywill be awful, stable, or great with probabilities 0.2, 0.5, and0.3, respectively. Given the state of the economy, the returns(one-year percentage changes) of the three stocks are independentand normally distributed. However, the means and standarddeviations of these returns depend on the state of the economy, asindicated in the table below.

Means			Stdevs
A	B	C	A	B	C
-30%	-25%	-15%	17%	10%	12%
-3%	4%	8%	10%	8%	6%
20%	25%	22%	15%	10%	10%

a. Use @RISK to simulate the value of theportfolio and the portfolio return in the next year.

Round your portfolio value answer to a whole number, and, ifnecessary, round your portfolio return answer to three decimaldigits.

Portfolio value	$
Portfolio return

How likely is it that you will have a negative return? Howlikely is it that you will have a return of at least 25%? Ifnecessary, round your answers to three decimal digits.

Pr(Portfolio return < 0%)
Pr(Portfolio return > 25%)

b. Suppose you had a crystal ball where youcould predict the state of the economy with certainty. The stockreturns would still be uncertain, but you would know whether yourmeans and standard deviations come from row 6, 7, or 8 of the fileP16_20.xlsx. If you learn, with certainty, that the economy isgoing to be great in the next year, run the appropriatesimulation to answer the same questions as in parta.

	Great
Portfolio value	$
Portfolio return
Pr(Portfolio return < 0%)
Pr(Portfolio return > 25%)

Repeat this if you learn that the economy is going to beawful.

	Awful
Portfolio value	$
Portfolio return
Pr(Portfolio return < 0%)
Pr(Portfolio return > 25%)