Consider the following information on three stocks: STATE OF ECONOMY PROBABILITY OF STATE OF ECONOMY RATE OF
Fantastic news! We've Found the answer you've been seeking!
Question:
- Consider the following information on three stocks:
STATE OF ECONOMY | PROBABILITY OF STATE OF ECONOMY | RATE OF RETURN IF STATE OCCURS | ||
STOCK A | STOCK B | STOCK C | ||
Boom | .25 | .22 | .33 | .50 |
Normal | .60 | .14 | .15 | .02 |
Bust | .15 | -.03 | -.18 | -.45 |
a. If your portfolio is invested 25 percent each in A and B and 50 percent in C, what is the portfolio expected return? The variance? The standard deviation?
b. If the expected T-bill rate is 3.70 percent, what is the expected risk premium on the portfolio?
Related Book For
Fundamentals of Investments, Valuation and Management
ISBN: 978-1259720697
8th edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
Posted Date: