Stock a Will Return 15 Percent in a Normal Economy

Multiple Choice

Stock A will return 15 percent in a normal economy and lose 14 percent in a recession.Stock B deals with inferior goods and will return 7 percent in a normal economy and 18 percent in a recession.There is a 20 percent chance of a recession occurring.What is the standard deviation of a portfolio that is equally weighted between the two stocks?

A) 3.60%
B) 6.50%
C) 1.30%
D) .13%
E) .36%