Question: Consider the following information: a. What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of

Consider the following information:

State of economy Boom Bust Probability of state of economy 0.65 0.35

a. What is the expected return on an equally weighted portfolio of these three stocks?

b. What is the variance of a portfolio invested 20 percent each in A and B, and 60 per cent in C?

State of economy Boom Bust Probability of state of economy 0.65 0.35 Rate of return if state occurs Stock A Stock B Stock C 0.15 0.03 0.07 0.33 0.13 -0.06

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