In Example 11.3, what are the standard deviations of the two portfolios?

Example 11.3

Suppose we had the following projections on three stocks:

We want to calculate portfolio expected returns in two cases. First, what would be the expected return on a portfolio with equal amounts invested in each of the three stocks? Second, what would be the expected return if half of the portfolio were in A, with the remainder equally divided between B and C?

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State of Economy Boom Bust Probability of State of Economy .50 .50 Stock A 10% 8 Stock B 15% 4 Returns Stock C 20% 0 Portfolio 13.75% 5.00