Question

Problem 11-10 Returns and Standard Deviations [LO 1, 2]

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			.360			.460			.340
Good		.41			.130			.110			.180
Poor		.31			.020			.030		?	.066
Bust		.09		?	.120		?	.260		?	.100

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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return             %

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            

What is the standard deviation of this portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation             %

Answer 1