Consider the following information about three stocks: State of Economy Boom Normal Bust a-2. a-3. Probability of State of Economy .22 .46 .32 b. Rate of Return if State Occurs Stock A Stock C .30 .58 .23 .19 .01 -.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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If the expected T-bill rate is 4.30 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 3.90 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock B .42 .21 -.22
Consider the following information about three stocks: State of Economy Boom Normal Bust a-2. a-3. Probability of State of Economy .22 .46 .32 b. Rate of Return if State Occurs Stock A Stock C .30 .58 .23 .19 .01 -.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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If the expected T-bill rate is 4.30 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 3.90 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock B .42 .21 -.22
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following information about three stocks:
State of Economy
Boom
Normal
Bust
b.
Probability of State
of Economy
.22
.46
.32
Rate of Return if State Occurs
Stock C
.58
.19
-.50
Stock A
.30
.23
.01
Stock B
.42
.21
-.22
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? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. What is the variance? (Do not round intermediate calculations and round your
answer to 5 decimal places, e.g., .16161.)
a-3.
What is the standard deviation? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If the expected T-bill rate is 4.30 percent, what is the expected risk premium on the
portfolio? (Do not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
c-1. If the expected inflation rate is 3.90 percent, what are the approximate and exact
expected real returns on the portfolio? (Do not round intermediate calculations
and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. What are the approximate and exact expected real risk premiums on the portfolio?
(Do not round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
Transcribed Image Text:a-1. Portfolio expected return
a-2. Variance
a-3. Standard deviation
b. Expected risk premium
c-1. Approximate expected real return
c-1. Exact expected real return
c-2. Approximate expected real risk premium
c-2. Exact expected real risk premium
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