Consider the following hypothetical data for an open economy (in millions): assets owned inside the u. s. by u. s. citizens = $140 comma 000 assets owned outside the u. s. by u. s. citizens = $19 comma 888 assets owned outside the u. s. by foreign citizens = $108 comma 000 assets owned inside the u. s. by foreign citizens = $20 comma 315 the value of the international investment position (iip) of the u. s. is $ .

The total value of your portfolio is $10,000: $3,000 of it is invested in stock a and the remainder invested in stock b. stock a has a beta of 0.8; stock b has a beta of 1.2. the risk premium on the market portfolio is 8%; the risk-free rate is 2%. additional information on stocks a and b is provided below. return in each state state probability of state stock a stock b excellent 15% 15% 5% normal 50% 9% 7% poor 35% -15% 10% what are each stock’s expected return and the standard deviation? what are the expected return and the standard deviation of your portfolio? what is the beta of your portfolio? using capm, what is the expected return on the portfolio? given your answer above, would you buy, sell, or hold the portfolio?