Question: Problem 1 3 - 2 3 Portfolio Returns and Deviations [ LO 2 ] Consider the following information about three stocks: table [ [

Problem 13-23 Portfolio Returns and Deviations [LO2]
Consider the following information about three stocks:
\table[[,Probability of State,Rate of Return if State Occurs],[State of Economy,of Economy,Stock A,Stock B,Stock C],[Boom,.26,.32,.44,.56],[Normal,.50,.13,.11,.09],[Bust,.24,.04,-.25,-.45]]
a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)
a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g.,.16161.)
a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)
b. If the expected T-bill rate is 3.30 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-1. If the expected inflation rate is 2.90 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,32.16.)
c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,32.16.)
 Problem 13-23 Portfolio Returns and Deviations [LO2] Consider the following information

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!