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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.

Essentials Of Investments
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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Consider the following information on a portfolio of three stocks: State of Probability of Economy State of Economy Stock A Rate of Return Boom .04 Normal .12 Bust .18 .15 .53 .32 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? a. Expected return Variance Standard deviation b. Expected risk premium Stock B Rate of Stock C Rate of Return Return .34 .24 -.23 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. % .48 .22 -.37 % %
Transcribed Image Text:Consider the following information on a portfolio of three stocks: State of Probability of Economy State of Economy Stock A Rate of Return Boom .04 Normal .12 Bust .18 .15 .53 .32 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? a. Expected return Variance Standard deviation b. Expected risk premium Stock B Rate of Stock C Rate of Return Return .34 .24 -.23 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. % .48 .22 -.37 % %
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