Intro The table below shows the expected rates of return for three stocks and their weights in some portfolio: Part 1 Attempt 1/10 for 10 pts What is the expected portfolio return? Correct The portfolio return in each state is the weighted average of the individual expected returns: E(RP, recession )=wAE(RA, recession )+wBE(RB, recession )+wCE(RC, recession ) =0.40.01+0.20.05+0.40.04 =0.002 E(RP,normal)=wAE(RA,normal)+wBE(RB,normal)+wCE(RC,normal)=0.40.04+0.20.09+0.40.03=0.046 E(RP,boom)=wAE(RA,boom)+wBE(RB,boom)+wCE(RC,boom)=0.40.09+0.20.11+0.40.11=0.102 The expected portfolio return is the weighted average of the portfolio returns during a recession and a boom: E(RP)=precessionE(RP,recession)+pnormalE(RP,normal)+pboomE(RP,boom)=0.10.002+0.50.046+0.40.102=0.0636 What is the standard deviation of the portfolio returns