Question: Problem 11-25 Portfolio Returns and Deviations [LO 1, 2] Consider the following information on a portfolio of three stocks: State of Probability of Stock

Problem 11-25 Portfolio Returns and Deviations [LO 1, 2] Consider the following information on a portfolio of three stocks: State of Probability of Stock A Rate of Economy State of Economy Return Boom Normal Bust .12 .53 .35 .09 Stock B Rate of Return .34 Stock C Rate of Return .53 .17 .18 .19 -.18 .27 -.37 a. If your portfolio is invested 36 percent each in A and B and 28 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 4.1 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 %

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!

You are considering either leasing or purchasing a car. You notice an ad that says you can lease the car you want for $399.00 per month. The lease term is 36 months with the first payment due at...

Autism Spectrum Disorder What is the Spectrum of Disorders associated with Autism? What is Autism? What is Autism Spectrum Disorder? Is there a difference between Autism and Autism Spectrum Disorder?...

Splish Brothers Company has been in business several years. At the end of the current year, the unadjusted balances show: Accounts Receivable Sales Revenue Allowance for Doubtful Accounts $291,400...

Companies use off-balance sheet accounting so that they do not have to include certain assets and liabilities in their financial statements. Off-balance sheet accounting is often used to make the...

Buon Appetito Limited has been experiencing increased customer demand for its specialty food products. In order to meet this demand, the company has bought additional refrigeration units to hold more...

1 Use Figures 12.4 and 12.5 to analyse the organisations stage of development in using IS. Review Sections 12.6 to 12.8. Has the organization used one or more of these systems, and what have been...

Maintaining an exercise program. 1. Using your colleges course catalog, identify courses that are related to exercise and sport psychology. Answer the following questions for each course. a. What...

On January 1, 2013, Castillo Company had a retained earnings balance of $206,000. During 2013, the following events occurred: 1. Treasury stock (common) was acquired at a cost of $14,000. State law...

Question 3 : Shadow SDN BHD has been offered to produce 6 5 0 0 units of auto parts. ATB Enterprise requires a special equipment part to produce auto parts. Darby SDN BHD can purchase that equipment...

TAX FORM PROJECT Client Facts: Nick M. Viall and Rachel A. Lindsay, husband and wife, file a joint return. They live at 113 Bachelor Way, Austin, TX. 42871. Nick's Social Security number is...

5. Sharon plans to contribute $400 to an RRSP every quarter for the next 28 years. During this time, the 3. Consider the sketch below and fill in the blanks: (5 marks) RRSP is expected to earn 9.8%...

5. Philosophers and scientists alike would argue that humans have: Only hedonic goals and purposes Only eudaimonic goals and purposes Neither hedonic nor eudaimonic goals and purposes A mixture of...

Mike was the policy owner and life insured of a 20-year term life insurance policy, with a $500,000 face value, on which he had named his spouse, Rachel, as the beneficiary. Unfortunately, Mike was...

sheridan co issued 700,000 of 5-year,6% bonds at 96 on Jan 1 2027. the bonds pay interest annually. compute the total cost of borrowing for these bonds compute the total cost of borrowing for these...

Endor Company begins the year with $180,000 of goods in inventory. At year-end, the amount in inventory has increased to $197,000. Cost of goods sold for the year is $1,300,000. Compute Endor's...

Under the U . S . Const. Art. 1 sec . 8 , the power to adopt a uniform national law of bankruptcy is invested exclusively in the U . S . Congress. Congress has passed a comprehensive code of...

Wholesalers Ltd. deals in the sale of foodstuffs to retailers. Owing to economic depression, the firm intends to relax its credit policy to boost productivity and sales. The firms current credit...

Q2.2 Why do you think some large, well-known companies such as Cisco Systems, Intel, and Microsoft prefer to trade on the Nasdaq National Market rather than on a major securities exchange such as the...

2.15 What is the primary motive for short selling? Describe the basic short-sale procedure. Why must the short seller make an initial equity deposit?

Q2.1 From 1990 to 2005, the average IPO rose by more than 20% in its first day of trading. In 1999, 117 deals doubled in price on the first day, compared to only 39 in the previous 24 years combined....