Question

Consider the following information:

		Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B	Stock C
Boom	0.25	0.23	0.39	0.26
Good	0.15	0.12	0.15	0.16
Poor	0.30	–0.02	–0.12	–0.03
Bust	0.30	–0.18	–0.18	–0.11

a. Your portfolio is invested 35 percent each in A and C and 30 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b-1. What is the variance of this portfolio? (Do not round intermediate calculations. Round your answer to 5 decimal places.)

Answer 1