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		.367	.467	.347
Good		.40		.137	.117	.187
Poor		.30		.027	.037	.092
Bust		.10		.127	.267	.107

Requirement 1:

Your portfolio is invested 32 percent each in A and C and 36 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