Question 2 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 0 35 0 24 0 36 0 55 Normal 0 50 0 17 0 13 0 09 Bust 0 15 0 00 0 28 0 45 If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return The variance The standard deviation If the expected T bill rate is 3 80 percent, what is the expected risk premium on the portfolio

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Question: Question 2 Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A

Question 2

Consider the following information about three stocks:

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B	Stock C
Boom	0.35	0.24	0.36	0.55
Normal	0.50	0.17	0.13	0.09
Bust	0.15	0.00	-0.28	-0.45

If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? The variance? The standard deviation?

If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the portfolio?

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