Question: 10. Returns and Standard Deviations (LO1, 2) Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs

10. Returns and Standard Deviations (LO1, 2) Consider the following information:

State of Economy

Probability of State of Economy

Rate of Return if State Occurs

Stock A

Stock B

Stock C

Boom

0.1

0.35

0.45

0.27

Good

0.6

0.16

0.1

0.08

Poor

0.25

-0.01

-0.06

-0.04

Bust

0.05

-0.12

-0.2

-0.09

  1. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio?

  1. What is the variance of this portfolio? The standard deviation?

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