Consider the following information on three stocks: A portfolio is invested 30 percent each in Stock A
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Question:
Consider the following information on three stocks:
A portfolio is invested 30 percent each in Stock A and Stock B and 40 percent in Stock C. Calculate:
a)the expected return on the portfolio
b)the standard deviation of the portfolio
c)the expected risk premium on the portfolio if the expected T-bill rate is 4 percent.
Table Probability of state of economy Rate return
stock A STOCK B STOCK C
Boom 0.45 0.55 0.35 0,65
Normal 0.50 0.44 0.18 0.04
Bust 0.05 0.05 -0.17 -0.64
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
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