1. The return on the Rush Corporation in the state of recession is estimated to be -23% and the return on Rush in the state of boom is estimated to be 31%. The return on the Oberman Corporation in the state of recession is estimated to be 41% and the return on Oberman in the state of boom is estimated to be -15%. Given this information, what is the covariance between Rush and Oberman if there is a 0.50 probability that the economy will be in the state of boom and a 0.50 probability that the economy will be in the state of recession.

2. Toyota has an expected return of 22%, and a variance of 0.012. Honda has an expected return of 18%, and a variance of 0.009. The covariance between Toyota and Honda is 0.06. Using these data, calculate the variance of a portfolio consisting of 50% Toyota and 50% Honda.

3. The return on shares of the Orange Company are predicted under the following states of nature. The states of nature are all equally likely, and because there are a total of three states, each state has a 33.333% chance of occurring.

Recession  -0.13

Normal +0.09

Boom +0.20

What is the standard deviation of Orange?