Question

State of the economy	Probability	T-bills	High Tech	Collections	U.S. Rubber	Market Portfolio	Two-Stock Portfolio
Recession	0.1	3.00%	-29.50%	24.50%	3.50%	-19.50%	-2.50%
Below average	0.2	3	-9.5	10.5	-16.5	-5.5
Average	0.4	3	12.5	-1	0.5	7.5	5.8
Above Average	0.2	3	27.5	-5	38.5	22.5
Boom	0.1	3	42.5	-20	23.5	35.5	11.3
Rate of Return				1.20%	7.30%	8.00%
Standard Deviation				11.2	18.8	15.2	4.6
CV				9.8	2.6	1.9	0.8
b				-0.5	0.88
How do you calculate the rate of return on each alternative, and fill in the blanks on the row under boom in the table? Calculate standard deviations as well.

Answer 1

beta of market portfolio is always 1.