Consider the following information on a portfolio of three stocks:
State of Probability of Stock A Stock B Stock C Economy State of Economy Rate of Return Rate of Return Rate of Return Boom .12 .03 .33 .49 Normal .54 .11 .23 .21 Bust .34 .17 â .22 â .36
a. If your portfolio is invested 38 percent each in A and B and 24 percent in C, what is the portfolioâs expected return, the variance, and the standard deviation? (
Consider the following information on a portfolio of three stocks:
| State of | Probability of | Stock A | Stock B | Stock C | ||||||||
| Economy | State of Economy | Rate of Return | Rate of Return | Rate of Return | ||||||||
| Boom | .12 | .03 | .33 | .49 | ||||||||
| Normal | .54 | .11 | .23 | .21 | ||||||||
| Bust | .34 | .17 | â | .22 | â | .36 | ||||||
a. If your portfolio is invested 38 percent each in A and B and 24 percent in C, what is the portfolioâs expected return, the variance, and the standard deviation? (
Related questions
Consider the following information:
| State of | Probability of State | Rate of Return if State Occurs | |||||||||||
| Economy | of Economy | Stock A | Stock B | Stock C | |||||||||
| Boom | .66 | .09 | .03 | .34 | |||||||||
| Bust | .34 | .23 | .29 | â | .14 | ||||||||
a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return %
b. What is the variance of a portfolio invested 21 percent each in A and B and 58 percent in C? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)
Variance of a portfolio
Problem 11-25 Portfolio Returns and Deviations [LO 2]
| Consider the following information on a portfolio of three stocks: |
| State of Economy | Probability of State of Economy | Stock A Rate of Return | Stock B Rate of Return | Stock C Rate of Return |
| Boom | .13 | .02 | .32 | .50 |
| Normal | .55 | .10 | .22 | .20 |
| Bust | .32 | .16 | â.21 | â.35 |
| Required: | |
| (a) | If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolioâs expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places (e.g., 32.16161) and input your other answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Expected return | % |
| Variance | |
| Standard deviation | % |
| (b) | If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Expected risk premium | % |
Consider the following information:
| State of | Probability of State | Rate of Return if State Occurs | |||||||||||
| Economy | of Economy | Stock A | Stock B | Stock C | |||||||||
| Boom | .66 | .09 | .03 | .24 | |||||||||
| Bust | .34 | .13 | .19 | â | .04 | ||||||||
| | |||||||||||||
a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return %
b. What is the variance of a portfolio invested 21 percent each in A and B and 58 percent in C? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)
Variance of a portfolio
