0 1

0 1
State Stock Rs Bond Rb Prob 0 1
Recession -0.07 0.17 0.33333 0 0.17 0.17 0.05667
Normal 0.12 0.07 0.33333 0 0.07 0.07 0.02333
Boom 0.28 -0.03 0.33333 0 -0.03 -0.03 -0.01

COVAR -0.0117
0.11 0.07 Port. ER 0.0700
0.11 0.07 Port. ER
0.11 0.07 0.07

0.1 0.9
0.1 0.9
State Stock Rs Bond Rb Prob 0.1 0.9
Recession -0.07 0.17 0.33333 -0.007 0.153 0.146 0.04867
Normal 0.12 0.07 0.33333 0.012 0.063 0.075 0.025
Boom 0.28 -0.03 0.33333 0.028 -0.027 0.001 0.00033

COVAR -0.0117
0.11 0.07 Port. ER 0.0740
0.11 0.07 Port. ER
0.11 0.07 0.074

0.2 0.8
0.2 0.8
State Stock Rs Bond Rb Prob 0.2 0.8
Recession -0.07 0.17 0.33333 -0.014 0.136 0.122 0.04067
Normal 0.12 0.07 0.33333 0.024 0.056 0.08 0.02667
Boom 0.28 -0.03 0.33333 0.056 -0.024 0.032 0.01067

COVAR -0.0117
0.11 0.07 Port. ER 0.0780
0.11 0.07 Port. ER
0.11 0.07 0.078

0 1
0 1
State Stock Rs Bond Rb Prob 0 1
Recession -0.07 0.17 0.2 0 0.17 0.17 0.034
Normal 0.12 0.07 0.3 0 0.07 0.07 0.021
Boom 0.28 -0.03 0.5 0 -0.03 -0.03 -0.015

COVAR -0.0117
0.162 0.04 Port. ER 0.0400
0.162 0.04 Port. ER
0.162 0.04 0.04

0.1 0.9
0.1 0.9
State Stock Rs Bond Rb Prob 0.1 0.9
Recession -0.07 0.17 0.2 -0.007 0.153 0.146 0.0292
Normal 0.12 0.07 0.3 0.012 0.063 0.075 0.0225
Boom 0.28 -0.03 0.5 0.028 -0.027 0.001 0.0005

COVAR -0.0117
0.162 0.04 Port. ER 0.0522
0.162 0.04 Port. ER
0.162 0.04 0.0522

0.2 0.8
0.2 0.8
State Stock Rs Bond Rb Prob 0.2 0.8
Recession -0.07 0.17 0.2 -0.014 0.136 0.122 0.0244
Normal 0.12 0.07 0.3 0.024 0.056 0.08 0.024
Boom 0.28 -0.03 0.5 0.056 -0.024 0.032 0.016

COVAR -0.0117
0.162 0.04 Port. ER 0.0644
0.162 0.04 Port. ER
0.162 0.04 0.0644

0.3 0.7
0.3 0.7
State Stock Rs Bond Rb Prob 0.3 0.7
Recession -0.07 0.17 0.2 -0.021 0.119 0.098 0.0196
Normal 0.12 0.07 0.3 0.036 0.049 0.085 0.0255
Boom 0.28 -0.03 0.5 0.084 -0.021 0.063 0.0315

COVAR -0.0117
0.162 0.04 Port. ER 0.0766
0.162 0.04 Port. ER
 0.162 0.04 0.0766

0.4 0.6
0.4 0.6
State Stock Rs Bond Rb Prob 0.4 0.6
Recession -0.07 0.17 0.2 -0.028 0.102 0.074 0.0148
Normal 0.12 0.07 0.3 0.048 0.042 0.09 0.027
Boom 0.28 -0.03 0.5 0.112 -0.018 0.094 0.047

COVAR -0.0117
0.162 0.04 Port. ER 0.0888
0.162 0.04 Port. ER
0.162 0.04 0.0888

0.5 0.5
0.5 0.5
State Stock Rs Bond Rb Prob 0.5 0.5
Recession -0.07 0.17 0.2 -0.035 0.085 0.05 0.01
Normal 0.12 0.07 0.3 0.06 0.035 0.095 0.0285
Boom 0.28 -0.03 0.5 0.14 -0.015 0.125 0.0625

COVAR -0.0117
0.162 0.04 Port. ER 0.1010
0.162 0.04 Port. ER
0.162 0.04 0.101

0.6 0.4
0.6 0.4
State Stock Rs Bond Rb Prob 0.6 0.4
Recession -0.07 0.17 0.2 -0.042 0.068 0.026 0.0052
Normal 0.12 0.07 0.3 0.072 0.028 0.1 0.03
Boom 0.28 -0.03 0.5 0.168 -0.012 0.156 0.078

COVAR -0.0117
0.162 0.04 Port. ER 0.1132
0.162 0.04 Port. ER
0.162 0.04 0.1132

0.7 0.3
0.7 0.3
State Stock Rs Bond Rb Prob 0.7 0.3
Recession -0.07 0.17 0.2 -0.049 0.051 0.002 0.0004
Normal 0.12 0.07 0.3 0.084 0.021 0.105 0.0315
Boom 0.28 -0.03 0.5 0.196 -0.009 0.187 0.0935

COVAR -0.0117
0.162 0.04 Port. ER 0.1254
0.162 0.04 Port. ER
0.162 0.04 0.1254

0.8 0.2
0.8 0.2
State Stock Rs Bond Rb Prob 0.8 0.2
Recession -0.07 0.17 0.2 -0.056 0.034 -0.022 -0.0044
Normal 0.12 0.07 0.3 0.096 0.014 0.11 0.033
Boom 0.28 -0.03 0.5 0.224 -0.006 0.218 0.109

COVAR -0.0117
0.162 0.04 Port. ER 0.1376
0.162 0.04 Port. ER
0.162 0.04 0.1376

0.9 0.1
0.9 0.1
State Stock Rs Bond Rb Prob 0.9 0.1
Recession -0.07 0.17 0.2 -0.063 0.017 -0.046 -0.0092
Normal 0.12 0.07 0.3 0.108 0.007 0.115 0.0345
Boom 0.28 -0.03 0.5 0.252 -0.003 0.249 0.1245

COVAR -0.0117
0.162 0.04 Port. ER 0.1498
0.162 0.04 Port. ER
0.162 0.04 0.1498

1 0
1 0
State Stock Rs Bond Rb Prob 1 0
Recession -0.07 0.17 0.2 -0.07 0 -0.07 -0.014
Normal 0.12 0.07 0.3 0.12 0 0.12 0.036
Boom 0.28 -0.03 0.5 0.28 0 0.28 0.14
COVAR -0.0117
0.162 0.04 Port. ER 0.1620
0.162 0.04 Port. ER
0.162 0.04 0.162
 DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.1800 0.1000 -0.0180 0.0108 0.0033 -0.0060
0.0100 0.0000 0.0000 0.0000 0.0000 0.0000
0.1700 -0.1000 -0.0170 0.0096 0.0033 -0.0057

0.0000 0.0000 -0.0117 Var S,B 0.0205 0.0067 -0.0117 RCovar

COVAR -0.0117
0.1431 0.0816 -0.0067 Coef. Corr
PortVar PortStdD
0.00667 0.08165
Ws 0.3633

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.1800 0.1000 -0.0180 0.0108 0.0033 -0.0060
0.0100 0.0000 0.0000 0.0000 0.0000 0.0000
0.1700 -0.1000 -0.0170 0.0096 0.0033 -0.0057

0.0000 0.0000 -0.0117 Var S,B 0.0205 0.0067 -0.0117 RCovar

COVAR -0.0117
0.1431 0.0816 -0.0067 Coef. Corr
PortVar PortStdD
0.0035 0.0592

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.1800 0.1000 -0.0180 0.0108 0.0033 -0.0060
0.0100 0.0000 0.0000 0.0000 0.0000 0.0000
0.1700 -0.1000 -0.0170 0.0096 0.0033 -0.0057

0.0000 0.0000 -0.0117 Var S,B 0.0205 0.0067 -0.0117 RCovar

COVAR -0.0117
0.1431 0.0816 -0.0067 Coef. Corr
PortVar PortStdD
0.00135 0.03677

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
 0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.0061 0.0781
Ws 0.3662

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.00302 0.05499

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.0009 0.03002

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0067 Coef. Corr
PortVar PortStdD
-0.0003 #NUM!
Ws 0.3662

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
-0.0005 #NUM!

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 0.0108 0.0034 -0.0060
-0.0420 0.0300 0.0005 0.0003 -0.0004
0.1180 -0.0700 0.0070 0.0025 -0.0041

-0.1560 0.0900 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.00026 0.01599

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0067 Coef. Corr
PortVar PortStdD
0.00195 0.04414

DevS DevB
 Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.00459 0.06778

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 0.0108 0.0034 -0.0060
-0.0420 0.0300 0.0005 0.0003 -0.0004
0.1180 -0.0700 0.0070 0.0025 -0.0041

-0.1560 0.0900 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.00819 0.09052

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

COVAR -0.0117
0.1351 0.0781 -0.0067 Coef. Corr
PortVar PortStdD
0.01275 0.11291

DevS DevB
Rs-RsBarRb-RbBar DevSq DevSq
-0.2320 0.1300 -0.0302 0.0108 0.0034 -0.0060
-0.0420 0.0300 -0.0013 0.0005 0.0003 -0.0004
0.1180 -0.0700 -0.0083 0.0070 0.0025 -0.0041

-0.1560 0.0900 -0.0132 Var S,B 0.0183 0.0061 -0.0105 RCovar

 COVAR -0.0117
0.1351 0.0781 -0.0061 Coef. Corr
PortVar PortStdD
0.01826 0.13511
Ws Wb Port. ER PortStdD
0.00 1.00 0.0400 0.0781
 The expected returns and standard deviations for portfolio created by
varying the weights in assets A and B

E( R) Var StDev Covar.

Asset A 0.162 0.018 0.13511
-0.01054
Asset B 0.04 0.006 0.0781

Portfolio Portfolio
weight Expect. Std.
A B Return Dev.
0% 100% 4.00% 7.81%
5% 95% 4.61% 6.75%
10% 90% 5.22% 5.68%
15% 85% 5.83% 4.62%
20% 80% 6.44% 3.55%
25% 75% 7.05% 2.49%
30% 70% 7.66% 1.43%
35% 65% 8.27% 0.42%
37% 64% 8.55% 0.25%
40% 60% 8.88% 0.76%
45% 55% 9.49% 1.80%
50% 50% 10.10% 2.86%
55% 45% 10.71% 3.92%
60% 40% 11.32% 4.99%
65% 35% 11.93% 6.05%
70% 30% 12.54% 7.12%
75% 25% 13.15% 8.18%
80% 20% 13.76% 9.25%
85% 15% 14.37% 10.31%
90% 10% 14.98% 11.38%
95% 5% 15.59% 12.45%
100% 0% 16.20% 13.51%
 Good/ V W X Y Z
Service
15 20 30 55 40
1990 Market
Price 17 42 10 25 55
1991 Market
Price 21 39 13 30 60
1992 Market
Price 17 40 11 28 70
1993 Market
Price 22 45 12 30 70
4970 100

5535 111.3682 11.37%

5725 115.1911 3.43%

6040 121.5292 5.50%

State RA RB Prob Deviation from Me
Existing Proj A Proj B Existing
Recession 1000 1200 200 0.2 200 240 40 480
Normal 500 500 500 0.6 300 300 300 -20
Boom 100 200 1200 0.2 20 40 240 -420
ER 520 580 580

State E&A E&B Prob Deviation from Me

E&A E&B E&A E&B
Recession 2200 1200 0.2 440 240
Normal 1000 1000 0.6 600 600
Boom 300 1300 0.2 60 260
ER 1100 1100
Deviation from Mean STD Deviation Computation Covariance Computation
Proj A Proj B Existing Proj A Proj B E&A E&B A& B
620 -380 46080 76880 28880 59520 -36480 -47120
-80 -80 240 3840 3840 960 960 3840
-380 620 35280 28880 76880 31920 -52080 -47120
81600 109600 109600 92400 -87600 -90400
285.6571 331.0589 331.0589
0.977061 -0.926304 -0.824818

Deviation from Mean STD Deviation Computation Covariance Computation

E&A E&B E&A E&B
1100 100 242000 2000 22000
-100 -100 6000 6000 6000
-800 200 128000 8000 -32000
376000 16000 -4000
613.1884 126.4911
-0.051571
DevS DevB
Rs-RsBar Rb-RbBar DevSq DevSq

### 200.0000 ### ### ### ###

500.0000 500.0000 ### ### ### ###
#VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!

#VALUE! #VALUE! #VALUE! Var S,B #VALUE! #VALUE! #VALUE! RCovar

COVAR -157777.7778
#VALUE! #VALUE! #VALUE! Coef. Corr