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			Stock B			Stock C
Economy	State of Economy			Rate of Return			Rate of Return			Rate of Return
Boom		.12			.11			.36			.41
Normal		.51			.19			.31			.29
Bust		.37			.20		?	.30		?	.39

a. If your portfolio is invested 44 percent each in A and B and 12 percent in C, what is the portfolios expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 32.16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return		%
Variance
Standard deviation		%

b. If the expected T-bill rate is 4.7 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.) Expected risk premium %