Question: 9. Returns and Standard Deviations (LO2, CFA5) Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy

9. Returns and Standard Deviations (LO2, CFA5) Consider the following information:

9. Returns and Standard Deviations (LO2, CFA5) Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A 0.18 0.11 Boom Good .30 Stock B 0.48 0.18 -0.09 -0.32 Stock C 0.33 0.15 -0.05 -0.09 Poor 0.05 Bust -0.03 a. Your portfolio is invested 25 percent each in A and C and 50 percent in B. What is the expected return of the portfolio? b. What is the variance of this portfolio? The standard deviation

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