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Item 4

Item 4

Consider the following information:

State of Economy	Probability of State of Economy			Rate of Return if State Occurs
				Stock A			Stock B			Stock C
Boom		0.64			0.10			0.18			0.36
Bust		0.36			0.10			0.03			0.08

a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Expected return %

b. What is the variance of a portfolio invested 25% each in A and B and 50% in C? (Do not round intermediate calculations. Round the final answer to 6 decimal places.)

Variance