Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom .58 Stock A .08 Stock B .17 Stock C .37 Bust .42 .14 .06 -.04 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) a. Expected return b. Variance %
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom .58 Stock A .08 Stock B .17 Stock C .37 Bust .42 .14 .06 -.04 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) a. Expected return b. Variance %
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:
Rate of Return if State Occurs
State of Economy
Probability of State
of Economy
Boom
.58
Stock A
.08
Stock B
.17
Stock C
.37
Bust
.42
.14
.06
-.04
a. What is the expected return on an equally weighted portfolio of these three stocks?
(Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b. What is the variance of a portfolio invested 20 percent each in A and B and 60
percent in C? (Do not round intermediate calculations and round your answer to 6
decimal places, e.g., .161616.)
a. Expected return
b. Variance
%
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