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 | .20 | .32 | .42 | .22 | ||||||||

Good | .50 | .17 | .13 | .11 | ||||||||

Poor | .25 | – | .04 | – | .07 | – | .05 | |||||

Bust | .05 | – | .12 | – | .17 | – | .09 | |||||

a. |
Your portfolio is invested 28 percent each in |

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? |

Standard deviation | % |

Answer #1

State of | Probability of | ||||||||

Economy | State of Economy | Stock A | Stock B | stock C | |||||

Boom | 0.2 | 0.32 | 0.42 | 0.22 | |||||

good | 0.5 | 0.17 | 0.13 | 0.11 | |||||

poor | 0.25 | -0.04 | -0.07 | -0.05 | |||||

bust | 0.05 | -0.12 | -0.17 | -0.09 | |||||

weight | 0.28 | 0.44 | 0.28 | ||||||

return | 0.133 | 0.123 | 0.082 | ||||||

weight * return | 0.03724 | 0.05412 | 0.02296 | ||||||

Expected return of portfolio E(X) | 11.43% | ||||||||

weight * return^2 | 0.00495292 | 0.00665676 | 0.00188272 | ||||||

E(X^2) | 0.0134924 | ||||||||

variance of portfolio | 0.00042 | ||||||||

standard deviation of portfolio | 2.06% |

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...

Consider the following information:
State of
Probability of
Rate of Return If State Occurs
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.15
.362
.462
.342
Good
.45
.132
.112
.182
Poor
.35
.022
.032
?
.068
Bust
.05
?
.122
?
.262
?
.102
Your portfolio is invested 32 percent each in A and C and 36
percent in B. What is the expected return of the portfolio?
(Do not round intermediate calculations and enter your...

Consider the following information:
State of
Probability of
Rate of Return If State Occurs
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.19
.366
.466
.346
Good
.41
.136
.116
.186
Poor
.31
.026
.036
−
.091
Bust
.09
−
.126
−
.266
−
.106
Your portfolio is invested 31 percent each in A and C and 38
percent in B. What is the expected return of the portfolio?
(Do not round intermediate calculations and enter your...

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
.10
.35
.40
.27
Good
.60
.16
.17
.08
Poor
.25
−
.01
−
.03
−
.04
Bust
.05
−
.12
−
.18
−
.09
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...

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
.10
.35
.40
.27
Good
.60
.16
.17
.08
Poor
.25
−
.01
−
.03
−
.04
Bust
.05
−
.12
−
.18
−
.09
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...

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
.18
.359
.459
.339
Good
.42
.129
.109
.179
Poor
.32
.019
.029
−.065
Bust
.08
−.119
−.259
−.099
Requirement
1:
Your portfolio is invested 28 percent each in A and C and 44
percent in B. What is the...

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 .10 .35 .40 .27 Good .60 .16 .17 .08 Poor .25
− .01 − .03 − .04 Bust .05 − .12 − .18 − .09 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...

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
.33
.45
.33
Good
.55
.11
.10
.17
Poor
.20
.02
.02
−.05
Bust
.10
−.12
−.25
−.09
a.
Your portfolio is invested 25 percent each in A and C and 50
percent in B. What is the expected...

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
.33
.43
.23
Good
.55
.18
.14
.12
Poor
.25
−.05
−.08
−.06
Bust
.05
−.13
−.18
−.10
a.
Your portfolio is invested 26 percent each in A and C, and 48
percent in B. What is the expected return of the portfolio?
(Do not round intermediate calculations and enter your
answer...

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 .20 .24 .36 .55 Normal .55 .17
.13 .09 Bust .25 .00 −.28 −.45 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. Enter
your answer as a percent rounded to 2...

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