Consider the following information on a portfolio of three stocks: State of Probability of State Stock A Rate of Economy Boom Normal of Economy .13 Return Stock B Rate of Return Stock C Rate of Return .04 .34 .58 Bust .53 .34 .12 .18 .14 -.13 .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 3.85 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 Variance % Standard deviation % b. Expected risk premium %
Consider the following information on a portfolio of three stocks: State of Probability of State Stock A Rate of Economy Boom Normal of Economy .13 Return Stock B Rate of Return Stock C Rate of Return .04 .34 .58 Bust .53 .34 .12 .18 .14 -.13 .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 3.85 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 Variance % Standard deviation % b. Expected risk premium %
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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Question
Vijay
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
.13
Return
Stock B Rate of
Return
Stock C Rate of
Return
.04
.34
.58
Bust
.53
.34
.12
.18
.14
-.13
.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 3.85 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
Variance
%
Standard deviation
%
b. Expected risk premium
%
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