Question

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			.31			.41			.21
Good		.60			.16			.12			.10
Poor		.20		–	.03		–	.06		–	.04
Bust		.05		–	.11		–	.16		–	.08

  

a.	Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation

%

Answer 1