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Derive the standard deviation of the returns on a portfolio that is invested in stocks x,...

Derive the standard deviation of the returns on a portfolio that is invested in stocks x, y, and z , where twenty percent of the portfolio is invested in stock x and 35 percent is invested in Stock z.

State of

Economy

Probability of

State of Economy

Rate of Return

if State Occurs

Stock x

Stock y

Stock z

Boom

.04

.17

.09

.09

Normal

.81

.08

.06

.08

Recession

.15

−

.24

.02

−

.13
1.

6.49 percent
2.

7.72 percent
3.

5.65 percent
4.

6.31 percent
5.

7.38 percent
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