Problem 13-10 Returns and Standard Deviations [LO1]

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		.15			.40			.50			.30
Good		.60			.16			.10			.09
Poor		.20			.02			.05			.03
Bust		.05			.18			.25			.11

a.	Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculaitons. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return

%

b-1	What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)

Variance

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

Standard deviation

%