Consider the following information about three stocks: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Boom Normal 0.25 Bust 0.40 0.35 0.32 0.24 0.44 0.22 0.02 -0.24 Stock C 0.60 0.20 -0.40 a-1. If your portfolio is invested 30% each in A and B and 40% in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.) Portfolio expected return % a-2. What is the variance? (Do not round intermediate calculations. Round the final answer to 8 decimal places.) Variance

Consider the following information about three stocks: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Boom Normal 0.25 Bust 0.40 0.35 0.32 0.24 0.44 0.22 0.02 -0.24 Stock C 0.60 0.20 -0.40 a-1. If your portfolio is invested 30% each in A and B and 40% in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.) Portfolio expected return % a-2. What is the variance? (Do not round intermediate calculations. Round the final answer to 8 decimal places.) Variance

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

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Question

a-3. What is the standard deviation? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.)

Standard deviation %

b. If the expected T-bill rate is 4.60%, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.)

Expected risk premium %

c-1. If the expected inflation rate is 2.60%, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter the answers as a percent rounded to 2 decimal places.)


Approximate expected real return	%
Exact expected real return	%

c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter the answers as a percent rounded to 2 decimal places.)


Approximate expected real risk premium	%
Exact expected real risk premium	%

Consider the following information about three stocks:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Boom
Normal
0.25
Bust
0.40
0.35
0.32
0.24
0.44
0.22
0.02
-0.24
Stock C
0.60
0.20
-0.40
a-1. If your portfolio is invested 30% each in A and B and 40% in C, what is the portfolio expected return? (Do not round
intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.)
Portfolio expected return
%
a-2. What is the variance? (Do not round intermediate calculations. Round the final answer to 8 decimal places.)
Variance

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