Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .20.24.36.58 Normal .50.20.18.16 Bust .30.04.36-45 a-1. If your portfolio is invested 40 percent each in A and B and 20 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.) b. If the expected T-bill rate is 4.00 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 3.60 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.)
Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .20.24.36.58 Normal .50.20.18.16 Bust .30.04.36-45 a-1. If your portfolio is invested 40 percent each in A and B and 20 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.) b. If the expected T-bill rate is 4.00 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 3.60 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.)
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 Probability of State of Economy Rate of Return
if State Occurs Stock A Stock B Stock C Boom .20 .24.36.58 Normal .50 .20 .18.16 Bust .30 .04 .36 .45 a-1. If your
portfolio is invested 40 percent each in A and B and 20 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
וי
.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.) b. If the expected T - bill rate is 4.00 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 3.60 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.)
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