CHAPTER 11 Return, Risk, and the Capital Asset Pricing Model 365 22. Portfolio Returns and Deviations Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock B Stock A Stock C Boom Normal Bust .25 .55 .20 .25 .18 .03 .35 .13 .18 .40 .03 -.45 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is b. If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the c. If the expected inflation rate is 3.50 percent, what are the approximate and exact the portfolio expected return? The variance? The standard deviation? portfolio? expected real returns on the portfolio? What are the approximate and exact expected real risk premiums on the portfolio