$101$

$02$

$25.$ Portfolio Returns and Deviations. Consider the following information on a portfolio of three stocks:

$\backslash$table$[[\backslash$table$[[$State of$],[$Economy$]],\backslash$table$[[$Probability of$],[$State of$],[$Economy$]],\backslash$table$[[$Stock A Rate$],[$of Return$]],\backslash$table$[[$Stock B Rate$],[$of Return$]],\backslash$table$[[$Stock C Rate$],[$of Return$]]],[$Boom$,\mathrm{.}15,\mathrm{.}02,\mathrm{.}32,\mathrm{.}60],[$Normal$,\mathrm{.}60,\mathrm{.}10,\mathrm{.}12,\mathrm{.}20],[$Bust$,\mathrm{.}25,\mathrm{.}16,-\mathrm{.}11,-\mathrm{.}35]]$

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 $3\mathrm{.}75$ percent, what is the expected risk premium on the portfolio?