1. Exams are approaching and Helen is allocating time to studying for exams.

She feels that

with the appropriate amount of studying, she has an 80% chance of getting an A in
Marketing. She also feels that she has a 60% chance of getting an A in Spanish with the
appropriate amount of studying. Given the demands on her time, she feels that she has
only a 45% chance of getting an A in both classes. What is the probability that Helen
does not get an A in either class?

2. Ryan is hoping to attend graduate school next year. Two of the schools he applied to are
the University of Utah and Ohio State University. The probability he gets accepted to
Utah given he got accepted to Ohio State is 0.75. The probability he gets accepted to
Ohio State is 0.05. The probability he gets accepted to Utah is 0.10. What is the
probability he gets accepted to Ohio State given he gets accepted to Utah? 

3. An investor has an $80,000 portfolio of which $60,000 has been invested in Stock A and
the remainder in Stock B. Other characteristics of the portfolio are as follows: 

Stock A Stock B
E(RA ) = μA = –2.3% E(RB ) = μB = 5.1%
σA = –23.82% σB = 7.54%
Cov(RA,RB ) = σAB = –11.20%

a. Calculate the correlation coefficient.

b. Calculate the expected return of the portfolio.
c. Calculate the standard deviation of the portfolio.

4. You have inherited a lottery ticket may be a $10,000 winner. You have a 0.25 chance of
winning the $10,000 and a 0.75 chance of winning $0. You have an opportunity to sell
the lottery ticket for $2,500. What is your expected return and what should you do if are
risk averse?