Probability of occurance possible return

Pv1 0.2500 r1 0.3000

Pv2 0.5 r2 0.1200
Pv3 0.2500 r3 (0.2500)
r4
r5

a)Expected return of stock E( r ) b)Risk associated with E( r )

0.0725 7.2500 ri-E( r ) {ri-E( r )}^2
0.2275 0.0518
0.0475 0.0023
(0.3225) 0.1040
σ^2
σ
[{ri-E( r )}^2]*Pri
0.0129
0.0011
0.0260
0.0401
0.2002
20.0172
 Expected return E (ri) Risk σi σi^2
Coca-Cola 0.1210 Coca-Cola 0.2158 0.0466
Duke-Energy 0.1516 Duke-Energy 0.2597 0.0674

Weight Wi W^2
Wc 0.5000 0.2500
Wd 0.5000 0.2500

correlation Co-efficient 0.2900

Expected return E (rp) Expected risk σp

wi*E(ri) % wi^2*σi^2 0.0116 0.0169
0.0605 2w1*w2*ρ12*σ1*σ2
0.0758 σp^2
0.1363 13.6300 σp
σp
0.0285
0.0081
0.0651
0.2552
25.5212
 Expected return E (ri) Risk σi σi^2
Coca-Cola 0.1210 Coca-Cola 0.2158 0.0466
Duke-Ener 0.1516 Duke-Energy 0.2597 0.0674

Weight Wi W^2
Wc 0.5000 0.2500
Wd 0.5000 0.2500

correlation Co-efficient (1.0000)

Expected return E (rp) Expected risk σp

wi*E(ri) % wi*σi 0.1079 0.1299 (0.0220)
0.0758 σp^2 0.0005
0.0758 7.5800 σp 0.0220
2.1950

w1
σp2 0.2597
σp1+σp2 0.4755

w1 0.546162

w2 0.453838
 utility
σ1^2
Er1 0.2000 σ1 0.3000 0.0900

Ert 0.0700 σt -

A 4.0000
A=4 A 2.0000
.5*A*σ1^2 0.1800 -
Er1 0.2000 0.0700

μ1 0.0200 0.0700
2.0000 7.0000

A=2
.5*A*σ1^2 0.0900 -
Er1 0.2000 0.0700

μ1 0.1100 0.0700
11.0000 7.0000
W1 0.40000 risky project
w2 0.60000 t-bill

risky project T-bill

Er1 0.17000 Er2 0.04500
Variance 0.08000 risk -
risk 0.28284

Expected return standard deviation/risk

E(rp) 0.09500 ri-E(rp) {ri-E(rp)}^2 {ri-E(rp)}^2*Pri
9.50000 0.18784 0.03528 0.01411
(0.09500) 0.00903 0.00542
variance 0.01953
standard deviation/risk 0.13975
13.97460
Erp 0.09

risky project T-bill

Er1 0.12000 Er2 0.05000
Variance 0.02250 risk -
risk 0.15000