Problem 11-10 Returns and Standard Deviations [LO 1, 2]

Consider the following information:

				Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy			Stock A	Stock B	Stock C
Boom		.20		.355	.455	.335
Good		.40		.125	.105	.175
Poor		.30		.015	.025	.055
Bust		.10		.115	.255	.095

Requirement 1:

Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return of the portfolio

%

Requirement 2:

(a)	What is the variance of this portfolio? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).)

Variance of the portfolio

(b)	What is the standard deviation of this portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Standard deviation

%