Consider the following information on a portfolio of three stocks: Probability of State of State of Economy Boom Normal Bust Economy 25 .60 15 Stock A Stock B Rate of Return -Rate of Return .02 10 16 .32 .12 -.11 Stock C Rate of Return .60 .20 -.35 Required: (a) If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance and the standard deviation? (Do not round intermediate calculations

Consider the following information on a portfolio of three stocks: Probability of State of State of Economy Boom Normal Bust Economy 25 .60 15 Stock A Stock B Rate of Return -Rate of Return .02 10 16 .32 .12 -.11 Stock C Rate of Return .60 .20 -.35 Required: (a) If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance and the standard deviation? (Do not round intermediate calculations

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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Question

Consider the following information on a portfolio of three stocks:
Probability of
State of
State of
Economy
Boom
Normal
Bust
Economy
.25
.60
15
Stock A
Stock B
Stock C
Rate of Return -Rate of Return Rate of Return
Expected return
Variance
Standard deviation
.02
10
16
Required:
(a) If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is
the portfolio's 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 the other answers as a percentage rounded to 2
decimal places (e.g., 32.16).)
%
.32
.12
-.11
%
.60
.20
-.35

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