Probability of Consider the following information on a portfolio of three stocks: State of Economy State...

Transcribed Image Text:

Probability of Consider the following information on a portfolio of three stocks: State of Economy State of Economy Stock A Rate of Return Boom Normal Bust .12 .55 .33 .07 Stock B Rate of Return .32 Stock C Rate of Return .45 .15 .27 .25 .16 -.26 -.35 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 4.5 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Expected return Variance Standard deviation b. Expected risk premium % % % Probability of Consider the following information on a portfolio of three stocks: State of Economy State of Economy Stock A Rate of Return Boom Normal Bust .12 .55 .33 .07 Stock B Rate of Return .32 Stock C Rate of Return .45 .15 .27 .25 .16 -.26 -.35 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 4.5 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Expected return Variance Standard deviation b. Expected risk premium % % %