Question: Consider the following information on three stocks: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B

Consider the following information on three stocks: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom 0.35 0.45 0.35 0.45 Normal 0.5 0.29 0.14 0.04 Bust 0.15 0.14 -0.16 -0.65 (a) If your portfolio is invested 31 percent each in A and B and 38 percent in C, the portfolio expected return is ???? percent (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)). The variance is ???? (Round your answer to 4 decimal places. (e.g., 32.1616)) and standard deviation is ???? percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) (b) If the expected T-bill rate is 3.8 percent, the expected risk premium on the portfolio is ???? percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) (c) If the expected inflation rate is 3.6 percent, the approximate and exact expected real returns on the portfolio are ???? percent and ???? percent, respectively. The approximate and exact expected real risk premiums on the portfolio are ???? percent and ???? percent, respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

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