Problem 13-23 Portfolio Returns and Deviations [LO2]

Consider the following information about three stocks:

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Stock A	Stock B	Stock C
Boom	.30	.27	.32	.55
Normal	.40	.23	.18	.15
Bust	.30	.01	.32	.48

a-1.	If your portfolio is invested 40 percent each in A and B and 20 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 4.90 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 4.40 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.)