Problem 13-23 Portfolio Returns and Deviations [LO2]

Consider the following information about three stocks:

				Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy			Stock A			Stock B			Stock C
Boom		.25			.22			.34			.56
Normal		.48			.19			.17			.15
Bust		.27			.03			.35			.44

a-1.	If your portfolio is invested 45 percent each in A and B and 10 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2.	What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.)
a-3.	What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	If the expected T-bill rate is 3.90 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.)
c-1.	If the expected inflation rate is 3.50 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2.	What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)