Consider the following information on a portfolio of three stocks: Probability of State Stock A Rate of Economy of Return State of Economy Boom Normal Bust .25 .60 .15 a. Expected return Variance Standard deviation b. Expected risk premium 0.10 % 0.00993 .04 .09 .15 0.10 % % Stock B Rate of Return 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? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .33 .13 -.14 Stock C Rate of Return .55 .19 -.28
Consider the following information on a portfolio of three stocks: Probability of State Stock A Rate of Economy of Return State of Economy Boom Normal Bust .25 .60 .15 a. Expected return Variance Standard deviation b. Expected risk premium 0.10 % 0.00993 .04 .09 .15 0.10 % % Stock B Rate of Return 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? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .33 .13 -.14 Stock C Rate of Return .55 .19 -.28
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 on a portfolio of three stocks:
Probability of State Stock A Rate
of Economy
of Return
State of Economy
Boom
Normal
Bust
.25
.60
15
a. Expected return
Variance
Standard deviation
b. Expected risk premium
0.10 %
.04
.09
15
0.00993
Stock B Rate
of Return
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? The standard deviation?
Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g.,
16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16.
0.10 %
%
.33
. 13
. 14
b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.
Stock C Rate
of Return
.55
. 19
-.28
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