3.

4.

6.

P13-6 Calculating Expected Return [LO1] Consider the following information: State of Economy Recession Normal Boom Probability of State of Rate of Return if State Economy Occurs 21 -.05 .65 .15 14 31 Calculate the expected return. Multiple Choice 13.56% 13.04% 12.39% 2.73% P13-7 Calculating Returns and Standard Deviations [LO1] Consider the following information: Rate of Return if State Occurs State of Economy Recession Normal Boom Probability of State of Economy .20 .70 .10 Stock A .03 .07 .11 Stock B -.18 .13 34 Calculate the expected return for Stock A. 6.60% 7.02% 6.93% 6.95% 6.86% Calculate the expected return for Stock B. 8.90% 9.67% 9.35% 8.46% 9.26% Calculate the standard deviation for Stock A. 2.15% 1.52% 2.26% 2.05% 2.24% Calculate the standard deviation for Stock B. 14.82% 10.48% 15.56% 14.07% 15.41% P13-10 Returns and Standard Deviations [LO1] Consider the following information: Rate of Return if State Occurs Probability of State of Economy State of Economy Boom Good Poor Bust -15 .55 .25 .05 Stock A 33 .18 -.05 -13 Stock B 43 .14 -08 -18 Stock C 23 .12 -.06 -10 Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? 10.86% 14.36% 7.46% 17.56% 24.86% What is the variance of this portfolio? 0.0206 0.6206 (0.7794) 1.2206 2.3206 What is the standard deviation? 14.35% 16.55% 12.05% 11.05% 18.75%