Consider the following information on a portfolio of three stocks;

(a) If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio€™s expected return? The Variance? The standard deviation?

(b) if the expected T-bill rate is 4.25 percent, what is the expected risk premium on theportfolio?

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State of EconomyState of EconomyRate of Return Probailt of SStock B Stock A Rate of ReturnRate of Return Boom Normal Bust .25 .55 .20 .05 09 12 25 12 .13 .60 20 .40