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		.16		.357	.457	.337
Good		.44		.127	.107	.177
Poor		.34		.017	.027	.057
Bust		.06		.117	.257	.097

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

%