Consider the following information on a portfolio of three stocks: State of Probability of State Stock A Rate of Economy Boom Normal of Economy Return Stock B Rate of Return .15 Stock C Rate of Return 04 .34 .48 .53 .12 .24 Bust .22 .32 .18 -.23 -.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. a. Expected return 6.94 % Variance 0.19200 Standard deviation 0.44 % b. Expected risk premium 2.59 %
Consider the following information on a portfolio of three stocks: State of Probability of State Stock A Rate of Economy Boom Normal of Economy Return Stock B Rate of Return .15 Stock C Rate of Return 04 .34 .48 .53 .12 .24 Bust .22 .32 .18 -.23 -.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. a. Expected return 6.94 % Variance 0.19200 Standard deviation 0.44 % b. Expected risk premium 2.59 %
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
Related questions
Question
Pakodi
![Consider the following information on a portfolio of three stocks:
State of Probability of State
Stock A Rate of
Economy
Boom
Normal
of Economy
Return
Stock B Rate of
Return
.15
Stock C Rate of
Return
04
.34
.48
.53
.12
.24
Bust
.22
.32
.18
-.23
-.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.
a. Expected return
6.94 %
Variance
0.19200
Standard deviation
0.44 %
b. Expected risk premium
2.59 %](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Feb096978-557a-414a-9f73-77de29ba70f8%2F7116d1dd-8e82-4bf0-9e63-6b9c11643023%2Ftuv8tf8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following information on a portfolio of three stocks:
State of Probability of State
Stock A Rate of
Economy
Boom
Normal
of Economy
Return
Stock B Rate of
Return
.15
Stock C Rate of
Return
04
.34
.48
.53
.12
.24
Bust
.22
.32
.18
-.23
-.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.
a. Expected return
6.94 %
Variance
0.19200
Standard deviation
0.44 %
b. Expected risk premium
2.59 %
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