Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom .64 Stock A .10 Stock B .18 Stock C .36 Bust .36 .10 .04 -.07 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 15 percent each in A and B and 70 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
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Raghubhai 

Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State
of Economy
Boom
.64
Stock A
.10
Stock B
.18
Stock C
.36
Bust
.36
.10
.04
-.07
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 15 percent each in A and B and 70 percent
in C? (Do not round intermediate calculations and round your answer to 6 decimal
places, e.g., .161616.)
a. Expected return
b. Variance
%
Transcribed Image Text:Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom .64 Stock A .10 Stock B .18 Stock C .36 Bust .36 .10 .04 -.07 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 15 percent each in A and B and 70 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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