Vijay Consider the following information on a portfolio of three stocks:State of Probability ofEconomy State of EconomyStock A Rate ofReturnBoom.04Normal.12Bust.18.15.53.32a. If your portfolio is invested 36 percent each in A and B and 28 percent in C, what is the portfolio'sexpected return, the variance, and the standard deviation?a. Expected returnVarianceStandard deviationb. Expected risk premiumStock B Rate of Stock C Rate ofReturnReturn.34.24-.23Note: 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 4.35 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 2decimal places, e.g., 32.16.%.48.22-.37%%

To calculate the standard deviation of a portfolio, start by determining the expected return and…

Consider the following information on a portfolio of three stocks: State of Probability of Economy State of Economy Stock A Rate of Return .04 Boom Normal Bust .12 .18 .15 .53 .32 Stock B Rate of Return .34 .24 -.23 Stock C Rate of Return .48 .22 -.37 a. If your portfolio is invested 36 percent each in A and B and 28 percent in C, what is the portfolio's expected return, the variance, and 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 4.35 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.

Consider the following information on a portfolio of three stocks: State of Probability of Economy State of Economy Stock A Rate of Return .04 Boom Normal Bust .12 .18 .15 .53 .32 Stock B Rate of Return .34 .24 -.23 Stock C Rate of Return .48 .22 -.37 a. If your portfolio is invested 36 percent each in A and B and 28 percent in C, what is the portfolio's expected return, the variance, and 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 4.35 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.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 1Q

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