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Consider the following information about three stocks: State of Economy Probability of State of Economy Stock...

Consider the following information about three stocks:

State of Economy Probability of State of Economy Stock A Stock B Stock C
Boom 0.22 0.30 0.42 0.58
Normal 0.46 0.23 0.21 0.19
Bust 0.32 0.01 -0.22 -0.50
a-1.

If your portfolio is invested 25 percent each in A and B and 50 percent in C, what is the portfolio expected return?
a-2. What is the variance?
a-3. What is the standard deviation?
b. If the expected T-bill rate is 4.30 percent, what is the expected risk premium on the portfolio?
c-1. If the expected inflation rate is 3.90 percent, what are the approximate and exact expected real returns on the portfolio?
c-2. What are the approximate and exact expected real risk premiums on the portfolio?
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