If You Invest $100 Now in Firm A, in One

Essay

If you invest $100 now in firm A, in one year you will get back $(30 - T), where T is the average temperature during the next summer.If you invest $100 now in firm B, in one year you will get back $(180 - T).The expected value of T is 70 and the standard deviation of T is 10.
a.Draw a graph showing the combinations of expected return and standard deviation that you can have by dividing $100 between stock in A and stock in B.(Hint: Expected value has the property that E(ax + b)= aE(x)+ b and standard deviation has the property that SD(ax + b)= [(absolute value of a)times SD(x)] +
b.What is the expected value and standard deviation of the safest investment strategy you can make by this means?
c.What is the highest expected value you can achieve?