Question

Problem 13-10 Returns and Standard Deviations [LO1]

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

.38

.48

.28

Good

.50

.14

.19

.12

Poor

.20

−.05

−.08

−.06

Bust

.10

−.19

−.23

−.09

  

a.	Your portfolio is invested 22 percent each in A and C, and 56 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculaitons. 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. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation

Answer 1